The City of London Investment Trust plc

Annual Report 2022


Strategic Report Performance 2-3 The City of London Story 4-5 Chairman’s Statement 6-8 Portfolio Snapshot 9-10 Fund Manager’s Report 11-15 Portfolio Information 16-17 Historical Information 18 Business Model 19-32 Governance Directors and Fund Manager 34-35		Directors’ Report 36-38 Corporate Governance Report 39-45 Audit Committee Report 46-48 Nominations Committee Report 49-50 Directors’ Remuneration Report 51-54 Statement of Directors’ Responsibilities 55 Financial Statements Independent Auditors’ Report to the Members of The City of London Investment Trust plc 57-63 Income Statement 64		Statement of Changes in Equity 65 Statement of Financial Position 66 Notes to the Financial Statements 67-82 Additional Information Securities Financing Transactions 84-85 Alternative Performance Measures 86-87 Glossary 88 General Shareholder Information 89-90 Dates of Dividend and Interest Payments 91 Corporate Information 92

Strategic Report

Objective

The Company’s objective is to provide long-term growth in income and capital, principally by investment in equities listed on the London Stock Exchange. The Board fully recognises the importance of dividend income to shareholders.

Performance at 30 June

Total Return Performance for year to 30 June 2022


	2022 %	2021 %
NAV1	7.5	20.0
Share price2	7.7	21.3
FTSE All-Share Index (Benchmark)	1.6	21.5
AIC UK Equity Income sector3	-1.5	26.4
IA UK Equity Income OEIC sector	-0.5	25.4

Total Return Performance for 10 years to 30 June 2022 (rebased to 100)

Dividend Growth compared with the Retail Price Index (“RPI”) and Consumer Price Index (“CPI”) for the 10 years to 30 June 2022 (rebased to 100)

Performance at 30 June


NAV per share 2022 390.9p	2021 387.6p	Premium 2022 2.5%	2021 0.6%
NAV per share (debt at fair value)		Premium (debt at fair value)
2022	2021	2022	2021
393.5p	384.1p	1.8%	1.5%
Share price		Gearing at year end
2022	2021	2022	2021
400.5p	390.0p	7.1%	6.9%
Revenue earnings per share		Dividends per share
2022	2021	2022	2021
20.7p	17.1p	19.6p	19.1p
Ongoing charge for the year5		Revenue reserve per share
2022	2021	2022	2021
0.37%	0.38%	9.5p	8.4p

Dividend Yields

1 Net asset value (“NAV”) per ordinary share total return with debt at fair value (including dividends reinvested)

2 Share price total return using mid-market closing price

3 AIC UK Equity Income sector size weighted average NAV total return (shareholders’ funds)

4 AIC UK Equity Income sector NAV total return calculated on a simple average basis

5 Calculated using the methodology prescribed by the Association of Investment Companies (“AIC”) Sources: Morningstar Direct, Janus Henderson, Refinitiv Datastream

A glossary of terms is on page 88 and Alternative Performance Measures on pages 86 and 87

The City of London Story

A Brief History

The Company was formed as City of London Brewery Company in 1860 to acquire Calverts, a family brewing business at Upper Thames Street in the City of London, registering as a limited company in 1891. The brewery had extensive interests in the licensed premises trade.

Photo credit: Keith Osbourne

In 1932, the name was changed to The City of London Brewery and Investment Trust Limited, parts of the business having been sold and the proceeds invested in securities according to investment trust principles. In 1968, the remaining part of the brewery business was sold and the Company concentrated exclusively on investments in securities.

In 1970, the Company appointed Touche, Remnant & Co. as Investment Manager and in 1982 the name was changed to TR City of London Trust PLC. In 1992, Touche, Remnant & Co. was acquired by Henderson Administration Group plc. The name of the Company was changed to The City of London Investment Trust plc in October 1997.

The Company has grown significantly with a strong performance record. Invested mainly in UK equities with a bias towards large, multinational companies through a conservative management style, it prioritises sustainable income and long-term capital growth.

Photo credit: The Brewery History Society (custodians)

The Company has increased its dividend every year since 1966 and this 56 year record is the longest of any investment trust.

In May 2017, Henderson Group plc merged with Janus Capital Group Inc. to become Janus Henderson Group plc which is quoted on the New York and Australian Stock Exchanges.

City of London: 56 Years of Dividend Growth

Source: Janus Henderson

History of income growth

The summer of 1966 was significant for English football fans as it was the first (and most recent) time that England’s mens team won the World Cup. It was also the start of City of London’s dividend growth track record which has continued uninterrupted for 56 years.

Over that time, an initial investment of:

£1,000 in CITY OF LONDON has

yielded investors £45,600 in gross income, assuming that they had not reinvested their income.

This compares to just £3,700 earned from a SAVINGS ACCOUNT, based on the Bank of England base rate, or

£31,400 paid out by the UK EQUITY MARKET, as measured by the FTSE All-Share Index over the same period.

Cumulative income received from £1,000 initial investment

Source: Janus Henderson and Refinitiv Datastream

Compounding income and total return

While City of London has provided investors with a growing source of income, the Company has also delivered strong long-term capital growth on a total return basis. If investors had reinvested their dividends back into shares in the Company over the period since 1966, an initial investment of £1,000 would be worth almost £780,000 today. For comparison, an investment of £1,000 in the UK market, as measured by the Datastream UK Market Index (data for the

FTSE All-Share Index total return only goes back to 1986) over 56 years would be worth £445,000 on a comparable total return basis. This comparison demonstrates a significant outperformance by City of London over the long term.

City of London total return from a £1,000 initial investment

Source: Janus Henderson and Refinitiv Datastream

Reserves

One of the main advantages of investment trusts is their ability to retain surplus income and create revenue reserves. These reserves can be added to in profitable years and paid out in the leaner years, thereby smoothing the level of dividend payments to shareholders where appropriate. While the investment process for City of London aims to avoid companies that cannot sustain dividend payments and the diversification

of the portfolio limits the impact of any dividend cuts, the use of revenue reserves and the ability, also, to distribute capital reserves arising from gains realised from investments sold provide powerful protection for the dividend in challenging market conditions.

City of London’s dividend growth track record and strong reserves position should give investors comfort over the long term.

Chairman’s Statement

“City of London’s NAV total return of 7.5% was 5.9 percentage points ahead of the FTSE All-Share Index. The dividend was increased for the 56th consecutive year and covered by earnings per share, leaving £6.0 million to be added to our revenue account.”

Sir Laurie Magnus

Chairman

Chairman’s Statement

I am pleased to report a net asset value (“NAV”) total return of 7.5%, which compares with a total return of 1.6% for the FTSE All-Share Index. The dividend was increased for the 56th consecutive year and covered by earnings per share, leaving £6.0 million to be added to our revenue reserve.

The Markets

The key economic concern over the 12 months was the significant rise in inflation, partly caused by higher oil and gas prices triggered in response to the war in Ukraine. UK CPI inflation reached 9.4% in June, the highest level for 30 years. The Bank of England increased the base rate, in four moves, from 0.1% to 1.25%.

The FTSE 100 Index (comprising the largest UK listed companies) produced a total return of 5.8% during the year. The best performing sector was oil and gas, benefiting from the rise in energy prices. Banks also performed well, with rising interest rates providing a helpful tailwind for their net interest margins. Pharmaceutical companies, which are typically defensive in a downturn, outperformed. In contrast, the indices for UK medium-sized and small companies, which have much less exposure to banks, oil and pharmaceutical companies, underperformed. The FTSE 250 Mid Cap Index produced a negative total return of 14.6% and the FTSE SmallCap Index a negative total return of 12.6%.

Performance

Earnings and Dividends

City of London’s revenue earnings per share increased by 21.2% to 20.72p, reflecting dividend growth from across the portfolio, with particular highlights from our stakes in the mining companies, Rio Tinto, Anglo American and BHP. Special dividends accounted as income increased by £3.9 million to £6.3 million. A further £5.4 million of special dividends were deemed to be capital by nature (largely resulting from business disposals) and were therefore accounted as capital rather than revenue.

City of London increased its dividend for the 56th consecutive year by 2.6% to 19.6p. Although the increase was lower than inflation over the 12 months, City of London has increased its dividend by 41.2% over the last 10 years compared with a cumulative increase in UK CPI inflation of 26.5%. The Board understands the importance of growing the dividend in real terms through the economic cycle.

Expenses remained under tight control, with our ongoing charge of 0.37% very competitive compared with other actively managed funds. Our revenue reserve increased by £6.0 million to £43.6 million. In addition, the capital reserve arising from capital gains on investments sold, which could also help fund dividend payments, rose by £30.0 million to £326.6 million.

NAV Total Return

City of London’s NAV total return of 7.5% was 5.9 percentage points ahead of the FTSE All-Share Index. Gearing contributed 1.5 percentage points to the outperformance due to the decline in fair value of our secured debt. The £30 million 2.67% maturing 2046 and the £50 million 2.94% maturing 2049 secured notes, which the Company has issued over the last five years, will provide low-cost debt financing over the next quarter of a century for investment in equities.

Stock selection contributed 4.7 percentage points, helped by the portfolio’s tilt towards large companies and dividend yield and away from highly valued, growth stocks and medium- sized and small companies. The biggest stock contributor was BAE Systems, the defence equipment manufacturer, followed by Imperial Brands, the tobacco company. Brewin Dolphin, the private client wealth management group, which received a takeover bid from Royal Bank of Canada, was the sixth biggest stock contributor. The underweight position in Shell was the biggest stock detractor, somewhat offset by the holding in TotalEnergies, the French international oil company, which was the eighth biggest stock contributor. The second biggest stock detractor was being underweight in AstraZeneca, although partly balanced by the holding in US pharmaceutical company, Merck, which was the ninth biggest contributor.

City of London’s NAV total return was ahead of the FTSE All-Share Index over 1, 3, 5 and 10 years. City of London was also ahead of the averages of the AIC UK Equity Income Investment Trust and IA UK Equity Income OEIC sectors over 1, 3, 5 and 10 years.

Share Issues

During the year City of London’s ordinary shares have again been in strong demand and continued to trade at a premium. 14 million ordinary shares were issued at a premium to NAV for proceeds of £57.1 million. Issuing shares at a premium enhances NAV and spreads costs across a larger asset base. Over the past ten years, City of London has issued 220.8 million shares, at a premium to NAV, increasing our share capital by 192.4%.

Environmental, Social and Governance

The Fund Manager takes environmental, social and governance (“ESG”) related risks and opportunities into careful consideration when selecting stocks for the portfolio. An analysis by Sustainalytics, a Morningstar-owned company widely used for ESG analytics, shows that City of London’s portfolio continues to rate slightly better for ESG risks compared with the FTSE All-Share Index. The Fund Manager reports on ESG matters at each Board meeting, including how it has voted on resolutions at investee company shareholder meetings. Please see pages 30 to 32 for more detail of the analysis by Sustainalytics and a description of how ESG considerations feature in the Fund Manager’s investment process.

Annual General Meeting

The 2022 Annual General Meeting (“AGM”) will be held at the offices of Janus Henderson, 201 Bishopsgate, London EC2M 3AE on Thursday, 27 October 2022 at 2.30pm. The meeting will include a presentation by our Fund Manager, Job Curtis, and Deputy Fund Manager, David Smith. Any shareholder who is unable to travel is encouraged to join virtually by Zoom, the conference software provider. There will, as usual, be live voting for those physically present at the AGM but we cannot offer live voting via Zoom because of technical restrictions. We therefore request all shareholders, and particularly those who cannot attend physically, to submit their votes by proxy to ensure their vote counts at the AGM.

Communication with Shareholders

The Board believes that many shareholders will welcome its proposal to reduce the Company’s increasing postage and printing costs by sending Annual and Half Year reports and other communications to them electronically. This proposal will also have a positive environmental impact. The Board fully appreciates that some shareholders will wish to continue to receive communications in printed form and there will be an option for them to request this. Further details of this proposal, which is expected to save significant costs annually for the Company, can be found in the AGM Notice and the letter enclosed with the Annual Report.

Outlook

The macro economic outlook has darkened since the year end, with inflation expectations increasing to levels last seen in the 1980s. The Bank of England which, this time last year, predicted that elevated inflation would be “transitory”, is now forecasting that it could reach 13.3%. It has reacted by increasing its base rate to 1.75%, whilst simultaneously warning of an impending recession. These forecasts are inevitably damaging for consumer and business confidence, with a growing risk that inflationary expectations become embedded as pay settlements “catch up.”

The outlook for the UK is particularly unclear as the new Prime Minister steers a course towards increased public borrowing and tax cuts. This uncertainty, which appears already to be unsettling confidence about sterling in the currency markets, is compounded by the prospect of higher interest rates across all major economies as central banks respond to inflation and start to reverse their programmes of quantitative easing. Most worrying, however, are the rising geopolitical risks stemming from Russia’s invasion of Ukraine and the tensions with China over Taiwan, with consequences which are already apparent for the sourcing of energy supplies and important manufacturing components.

It remains the case, despite these concerns, that UK equities still offer a better dividend yield than can be obtained from bank deposits or ten-year gilts. Many of our shareholdings are in high quality businesses, with significant foreign revenues, which are well placed to withstand economic turbulence. Furthermore, UK-listed companies continue to attract takeover bids in recognition of their relative value compared with peers traded in other stock markets (the latest in our portfolio being for Brewin Dolphin). During the recent corporate results season, a number of our investee companies have demonstrated their ability to cope with inflationary pressures with positive dividend declarations. These considerations, together with the advantages of our investment trust status, underpin the Board’s confidence of building on City of London’s unique 56-year record of annual dividend increases and of continuing to provide reliable returns.

Sir Laurie Magnus CBE

Chairman

16 September 2022

Portfolio Snapshot

Forty Largest Investments as at 30 June 2022

The 40 largest investments, representing 77.96% of the portfolio, are listed below.


Position	Company	Sector	Market value £’000	Portfolio %
1	British American Tobacco	Tobacco	91,507	4.76
2	Shell	Oil, Gas and Coal	71,723	3.73
3	Diageo	Beverages	68,463	3.56
4	BAE Systems	Aerospace and Defence	64,340	3.35
5	RELX	Media	56,679	2.95
6	AstraZeneca	Pharmaceuticals and Biotechnology	56,160	2.92
7	HSBC	Banks	53,014	2.76
8	GlaxoSmithKline	Pharmaceuticals and Biotechnology	50,579	2.63
9	Imperial Brands	Tobacco	48,641	2.53
10	BP	Oil, Gas and Coal	48,343	2.51
Top 10			609,449	31.70
11	Tesco	Personal Care, Drug and Grocery Stores	45,972	2.39
12	Unilever	Personal Care, Drug and Grocery Stores	45,954	2.39
13	National Grid	Gas, Water and Multi-utilities	44,794	2.33
14	Rio Tinto	Industrial Metals and Mining	44,740	2.33
15	M&G	Investment Banking and Brokerage Services	44,174	2.30
16	Phoenix	Life Insurance	42,308	2.20
17	SSE	Electricity	39,107	2.03
18	Anglo American	Industrial Metals and Mining	31,866	1.66
19	Legal & General	Life Insurance	31,374	1.63
20	Reckitt Benckiser	Personal Care, Drug and Grocery Stores	30,790	1.60
Top 20			1,010,528	52.56
21	St. James’s Place	Investment Banking and Brokerage Services	30,636	1.59
22	TotalEnergies	Oil, Gas and Coal	29,479	1.53
23	Schroders	Investment Banking and Brokerage Services	28,990	1.51
24	Nestlé	Food Producers	28,750	1.49
25	Direct Line Insurance	Non-life Insurance	28,694	1.49
26	Vodafone	Telecommunications Service Providers	27,861	1.45
27	Severn Trent	Gas, Water and Multi-utilities	27,859	1.45
28	Lloyds Banking	Banks	27,501	1.43
29	Persimmon	Household Goods and Home Construction	26,641	1.39
30	IG	Investment Banking and Brokerage Services	25,548	1.33
Top 30			1,292,487	67.22
31	Verizon Communications	Telecommunications Service Providers	23,824	1.24
32	BHP	Industrial Metals and Mining	22,970	1.19
33	Barclays	Banks	22,968	1.19
34	3i	Investment Banking and Brokerage Services	22,915	1.19
35	Merck	Pharmaceuticals and Biotechnology	21,064	1.09
36	Land Securities	Real Estate Investment Trusts	19,920	1.04
37	Munich Re	Non-life Insurance	19,248	1.00
38	Novartis	Pharmaceuticals and Biotechnology	18,287	0.96
39	Microsoft	Software and Computer Services	17,978	0.93
40	Segro	Real Estate Investment Trusts	17,579	0.91
Top 40			1,499,240	77.96

Convertibles and all classes of equity in any one company are treated as one investment.

Classification of Investments and Portfolio Weighting as at 30 June 2022


		Portfolio %	FTSE All-Share Index %	Relative to the FTSE All-Share Index percentage points
Energy	Oil, Gas and Coal	8.1	10.7	(2.6)
		8.1	10.7	(2.6)
Basic Materials	Chemicals	1.4	0.7	0.7
	Industrial Metals and Mining	5.2	6.8	(1.6)
	Precious Metals & Mining	–	0.2	(0.2)
		6.6	7.7	(1.1)
Industrials	Aerospace and Defence	3.2	2.1	1.1
	Construction & Materials	1.6	1.3	0.3
	Electronic and Electrical Equipment	1.1	0.9	0.2
	General Industrials	1.8	1.7	0.1
	Industrial Engineering	–	0.5	(0.5)
	Industrial Support Services	1.9	3.1	(1.2)
	Industrial Transportation	0.4	0.9	(0.5)
		10.0	10.5	(0.5)
Consumer Staples	Beverages	4.7	3.8	0.9
	Food Producers	2.1	0.6	1.5
	Personal Care, Drug and Grocery Stores	6.4	7.2	(0.8)
	Tobacco	7.3	4.3	3.0
		20.5	15.9	4.6
Health Care	Health Care Providers	–	0.1	(0.1)
	Medical Equipment and Services	0.4	0.6	(0.2)
	Pharmaceuticals and Biotechnology	8.9	11.7	(2.8)
		9.3	12.4	(3.1)
Consumer Discretionary	Consumer Services	–	1.3	(1.3)
	Household Goods and Home Construction	2.2	1.2	1.0
	Leisure Goods	–	0.1	(0.1)
	Media	2.9	3.0	(0.1)
	Personal Goods	–	0.4	(0.4)
	Retailers	1.0	1.5	(0.5)
	Travel and Leisure	0.7	2.6	(1.9)
		6.8	10.1	(3.3)
Telecommunications	Telecommunications Service Providers	4.1	2.3	1.8
	Telecommunications Equipment	0.5	0.1	0.4
		4.6	2.4	2.2
Utilities	Electricity	2.0	0.9	1.1
	Gas, Water and Multi-utilities	4.8	2.6	2.2
	Waste and Disposal Services	–	0.1	(0.1)
		6.8	3.6	3.2
Financials	Banks	5.9	8.7	(2.8)
	Closed End Investments	–	6.3	(6.3)
	Finance and Credit Services	–	1.4	(1.4)
	Investment Banking and Brokerage Services	8.9	2.5	6.4
	Life Insurance	4.5	2.6	1.9
	Non-life Insurance	3.9	0.8	3.1
		23.2	22.3	0.9
Real Estate	Real Estate Investment Trusts	2.6	2.6	–
	Real Estate Investment and Services Development	–	0.5	(0.5)
		2.6	3.1	(0.5)
Technology	Software and Computer Services	1.5	1.3	0.2
		1.5	1.3	0.2
Total		100.0	100.0	–

Fund Manager’s Report

Job Curtis

“Overall, there are currently serious macroeconomic and political challenges but the quality of the companies in the portfolio gives confidence for the future.”

Fund Manager’s Report

Investment Background

The UK stock market made solid gains during the first half of the period under review as companies continued to benefit from the reopening of the economy after the restrictions caused by the pandemic. In addition, monetary policy was stimulatory with the UK base rate at 0.1%. The rise in inflation that took place was higher than the Bank of England expected and longer lasting. The base rate was raised to 0.25% in December 2021 and there were four further increases to reach 1.25% by the end of June 2022. In the US, inflation was also higher than anticipated and the Federal Reserve increased interest rates. The move from the previous era of quantitative easing (ultra-low interest rates and bond purchases by central banks) to quantitative tightening (rising interest rates and no bond purchases/bond sales by central banks) led to more subdued stock markets in the first six months of 2022. The rise in interest rates and bond yields was a factor behind the derating of some shares that had started 2022 on a high valuation, based on future profits. The highest inflation for several decades led to uncertainty on the impact on the consumer and corporate profit margins. Finally, the invasion by Russia of Ukraine significantly increased geopolitical risks.

FTSE All-Share Index total return (rebased to 100)

Source: Refinitiv Datastream, as at 30 June 2022. Rebased to 100 as at 30 June 2021

A key factor causing inflation was the oil price, which rose by 53% over the 12 months. The oil price had slumped in the first part of the pandemic given the collapse in economic activity. As demand subsequently recovered, the oil market tightened, partly because of the lack of spare oil production capacity as a result of under investment in recent years given scepticism about long-term returns due to decarbonisation. In addition, the war in Ukraine was an adverse shock to oil and gas supply.

London Brent Crude Oil Index (ICE) US$/bbl

Source: Bloomberg, as at 30 June 2022

Although the UK base rate of 1.25% in June 2022 was its highest for over 10 years, it was still significantly below the dividend yield of the UK equity market, as it had been throughout the 12 months. The 10-year Gilt yield, which also remained below the equity market dividend yield, rose from 0.8% to 2.2% over the 12 months in response to the rise in inflation and the UK base rate. Overall, the additional yield available in UK equities was supportive of gearing. City of London’s gearing started the period at 6.9%, rose to 8.3% at 31 December 2021 and finished the 12 months at 7.1% at 30 June 2022.

FTSE All-Share Index dividend yield, UK 10-year gilt yield and UK base rate

Source: Refinitiv Datastream, as at 30 June 2022

Over the 12 months, sterling weakened against the US dollar by 12% but was steady against the euro. The strength of the US dollar reflected the more aggressive stance towards fighting inflation and raising interest rates by the US’s Federal Reserve compared with the Bank of England and the European Central Bank. In addition, the US dollar has a “safe haven” status and attracted funds given the uncertainty caused by the war in Ukraine.

UK £ vs Euro and US$

Source: Refinitiv Datastream, as at 30 June 2022

Performance Review

Estimated performance attribution (relative to FTSE All-Share Index total return)


	2022 %	2021 %
Stock selection	+4.69	-3.80
Gearing	+1.53	+2.49
Expenses	-0.37	-0.38
Share issues/buy backs	+0.04	+0.27
Total	+5.89	-1.42

Source: Janus Henderson

City of London outperformed the FTSE All-Share Index by 5.89 percentage points in the year to 30 June 2022. Stock selection contributed by 4.69 percentage points and gearing by 1.53 percentage points. The fall in the fair value of City of London’s secured notes caused the positive contribution of gearing.

The biggest stock contributor was BAE Systems, which is the UK’s biggest defence contractor but has its largest operations in the US. The war in Ukraine led to a rerating of BAE’s shares. Tobacco shares, which were lowly valued and had resilient profits, performed well and Imperial Brands and British American Tobacco were among the top six contributors. The takeover bid for Brewin Dolphin by Royal Bank of Canada led to it being the fifth biggest contributor. Not holding Scottish Mortgage or Ashtead were also among the top six contributors.

The biggest detractor was the underweight position in Shell, although this was somewhat offset by the holding in TotalEnergies, which was the eighth largest contributor. The underweight position in AstraZeneca was the second biggest detractor (partly offset by the position in Merck which was the ninth largest contributor). The biggest detracting stock where City of London was overweight was St. James’s Place, which had performed very well in the previous 12-month period.

FTSE 100, 250 and SmallCap Indices total return

(rebased to 100)

Source: Refinitiv Datastream, as at 30 June 2022. Indices rebased to 100 as at 30 June 2021. Indices are total return

As can be seen from the chart, it was a relatively good year for large companies, with the FTSE 100 Index of the largest companies returning 5.8% compared with negative 14.6% for the FTSE 250 Index of medium-sized companies and negative 12.6% for the FTSE SmallCap Index. The FTSE 100 Index was helped by the outperformance of oil company shares, banks and utilities.

FTSE 350 Higher and Lower Yield (rebased to 100)

Source: Refinitiv Datastream, as at 30 June 2022. Rebased to 100 as at 30 June 2021

Higher yielding shares also had a good year, as the chart above shows. It compares the performance of the FTSE 350 Higher Yield Index (the higher dividend yielding half of the largest 350 shares listed in the UK) with the FTSE 350 Lower Yield Index (the lower dividend yielding half of the largest 350 shares listed in the UK). Oil and tobacco shares were significant contributors to the outperformance of the FTSE 350 Higher Yield Index.

Distribution of the portfolio as at 30 June 2022

Source: Janus Henderson, 30 June 2022

During the year, the proportion of the portfolio invested in companies with their prime listing overseas rose from 15% to 17%. The proportion invested in large UK-listed companies fell by one percentage point, as did the proportion invested in medium-sized and small UK-listed companies. This increase in the overseas listed share reflected the move by BHP away from being partly listed in London to a full listing in Australia and also the move by Ferguson to a US listing. The overseas listed stocks provide the portfolio with additional diversification and in some cases exposure to types of business not listed on the London Stock Exchange, such as Microsoft.

Portfolio Changes

Takeover activity led to two holdings leaving the portfolio. First, the bidding war from two private equity groups for Wm Morrison, the supermarket group, which had started in the previous financial year, completed at a significant premium to the share price which had prevailed before. Secondly, Daily Mail & General was taken private by Lord Rothermere and his family.

In addition, Brewin Dolphin, the private wealth manager, agreed to be taken over by Royal Bank of Canada. Half City of London’s holding was sold at a very small discount to the offer price, with the deal expected to complete by the end of the third quarter of 2022. A new holding was initiated in Rathbones, another leading UK wealth manager, at a considerable discount to the valuation at which Brewin Dolphin was taken over. Private client wealth management is enjoying secular growth as people choose to take more control of their pension assets.

A significant reduction was made to the holding in BHP, which became fully listed in Australia. BHP has been a very successful holding in terms of both share price appreciation and dividends paid. The most important commodity that BHP mines is iron ore, which is very dependent on demand from China. After the strong performance of the iron price in recent years, there were grounds for some caution and therefore a reduction was made in BHP.

Iron Ore (US$/metric tonne)

Source: Refinitiv Datastream, as at 30 June 2022

A small reduction was also made in Anglo American, while Rio Tinto was left unchanged, leaving the mining sector as 5.2% of the total portfolio at 30 June 2022.

A new holding in Woodside Energy came into the portfolio as a result of the merger of BHP’s oil and gas interests with those of Woodside, which is also listed in Australia. Woodside’s assets are predominantly in Australia and the Gulf of Mexico. Some 50% of its total oil and gas production is Liquified Natural Gas (“LNG”), which is seen as a “transition” energy source because it emits less carbon than coal or oil but is more efficient than renewables. Demand for LNG has been growing steadily in recent years and is expected to strengthen further as Europe weans itself off Russian gas.

Given the favourable backdrop for oil companies, an increase was made to the stake in TotalEnergies, the international oil company headquartered in France, which has a good dividend track record.

Two other new overseas-listed companies were bought. Sanofi is the France-headquartered, international pharmaceutical company with key franchises in immunology, oncology and rare diseases. Its growth is expected to be driven by the success of Dupixent, its medicine for dermatitis (eczema).

Holcim is a Switzerland-listed, international building materials company. It is the global leader in cement as well as having significant operations in ready-mix concrete, aggregates and roofing products. It should benefit from growing demand for the building materials and the products it makes in both developed and developing markets. The other two building materials companies in the portfolio, Ibstock (the brick maker) and Marshalls (paving stones and roofing products), are both focused on the UK market.

In addition to Rathbones, mentioned above, two other new medium-sized (outside the FTSE 100 Index), UK-listed companies were bought. Hays is a specialist recruitment agency for permanent and temporary staff split into three main divisions: UK and Ireland, Australia and New Zealand, and Germany. Hays has been trading well, supported by rising wages, increased fees for temps and higher demand across its network. Wincanton is a leading supply solutions company with a long history, operating from some 200 warehouses across the UK. Its digital and e-fulfilment division is growing rapidly.

A new holding was also bought in 3i, the investment company focused on private equity. Slightly over half of 3i’s net assets are accounted for by its investment in Action, a successful and fast-growing discount retailer in Continental Europe. In addition, 3i has investments in private companies benefiting from certain growth trends: demographics, value for money, low carbon and digitisation.

Against a background of rising interest rates, vulnerable sectors were reviewed. An underweight position was maintained in consumer discretionary sectors, such as retail and travel and leisure. In real estate investment trusts (“REITs”), Hammerson, the owner of shopping centres, was sold given the continuing over capacity in that part of the property market. Holdings were retained in Land Securities and British Land, which are mainly invested in offices, and Segro, which owns industrial property and warehouses. In housebuilding, Berkeley, the specialist in London flats, was sold but Persimmon and Taylor Wimpey, the nationwide builders of family homes, were retained.

Finally, a complete sale was made of Go-Ahead, the transport group, which had over-accounted for profits under a government contract in its rail division. It received a fine and a temporary suspension of its London Stock Exchange listing.

Portfolio Outlook

Consumer staples companies, which make and sell everyday products, constitute 20.5% of the portfolio. They tend to have a degree of pricing power to cope with inflationary cost pressures. Three of the ten largest stocks in the portfolio are consumer staples companies. British American Tobacco (largest holding) and Imperial Brands (ninth largest) have strong cash flow to support their dividends. British American Tobacco has also made significant progress in the transition to less harmful products and is the leader in vaping, with Vuse, in the United States. Diageo (third largest holding) is the world’s largest spirits company (outside China) as well as owning Guinness. Leading spirits brands it owns include Johnnie Walker (Scotch whisky), Tanqueray (gin) and Smirnoff (vodka). It has also grown to become the leader by value of total sales in tequila, which is the fastest growing spirits category in the United States, with brands such as Don Julio and Casamigos. Tesco (11th largest holding) and Unilever (12th largest) are also consumer staples companies. Tesco has market leadership and competitive pricing in UK food retailing. Unilever has significant sales from its beauty and personal care, food and homecare divisions in both developed and emerging markets.

The oil sector is represented in the top ten by Shell (second largest holding) and BP (tenth largest). Both companies benefit from the elevated price of oil, which is likely to persist given the imbalance between demand and supply in the global market. Long term, a key determinant of their performance will be how well they execute on ambitious plans to achieve “Net Zero”, which means completely negating the amount of greenhouse gases they produce. They aim to achieve this by reducing fossil fuel exposure, investing in renewable energy (wind and solar) and developing carbon capture technology. National Grid (13th largest holding) and SSE (17th largest) are both well placed to benefit from electrification of the economy and growth in renewable energy.

It is likely that governments will increase defence spending given the rising threat from hostile countries. The products made by BAE Systems (fourth largest holding) are of crucial importance in this context. RELX (fifth largest), which provides essential information and analytics for businesses, professionals and scientists, is expected to continue its outstanding record of steady growth.

The pharmaceutical sector constitutes 8.9% of the portfolio. The two largest holdings are UK listed, AstraZeneca (sixth largest holding) and GlaxoSmithKline (eighth largest). In addition, four overseas-listed pharmaceutical companies are held: Merck, Novartis, Johnson & Johnson and Sanofi. These companies have a strong record of bringing to the market medicines and vaccines that improve health, prolong and save lives. Given its importance and the large-scale funding from governments, healthcare spending is fairly resilient in a period of slowing economic growth.

HSBC is the seventh largest holding and there are also smaller positions in Lloyds Banking and Barclays in the portfolio. Banks should benefit from the rise in interest rates as they are able to improve rates for deposit accounts and the margin between deposits and loans. Banks are vulnerable to loan losses and impairments if the rise in interest rates leads to a recession. Life assurers Phoenix (16th largest holding) and Legal & General (19th largest) offer anomalously high dividend yields, as does M&G (15th largest), which is a mixture of fund manager and life assurer.

Revenue exposure (%)

Source: FactSet, as at 30 June 2022

The portfolio is well diversified with a bias towards large, international companies and shares with above average dividend yield. Some 67% of investee companies’ revenues comes from overseas. The aim is to be invested in those companies that can support their dividends through profits and cash generation and invest enough for growth. While dividends from mining companies have probably peaked, given lower prices for their key commodities, dividend recovery from other parts of the market, such as banks and energy, should continue to drive the aggregate level of market dividends in the UK higher. Overall, there are currently serious macroeconomic and political challenges but the quality of the companies in the portfolio gives confidence for the future.

Job Curtis David Smith

Fund Manager Deputy Fund Manager

16 September 2022

Portfolio Information

Sector Breakdown of Investments as at 30 June 2022


	Valuation £’000
ENERGY
Oil, Gas and Coal
Shell	71,723
BP	48,343
TotalEnergies1	29,479
Woodside Energy1	6,795
	156,340
Total Energy	156,340
BASIC MATERIALS
Chemicals
Synthomer	7,861
Croda International	7,441
Victrex	5,677
Johnson Matthey	5,103
	26,082
Industrial Metals and Mining
Rio Tinto	44,740
Anglo American	31,866
BHP	22,970
	99,576
Total Basic Materials	125,658
INDUSTRIALS
Aerospace and Defence
BAE Systems	64,340
	64,340
Construction and Materials
Ibstock	13,555
Holcim1	11,419
Marshalls	5,542
	30,516
Electronic and Electrical Equipment
IMI	10,946
XP Power	5,700
Rotork	4,211
	20,857
General Industrials
Swire Pacific1	10,536
Mondi	9,458
Siemens1	9,212
Smiths	4,898
	34,104
Industrial Support Services
Ferguson	15,620
PayPoint	10,116
Hays	10,044
	35,780
Industrial Transportation
Wincanton	7,557
	7,557
Total Industrials	193,154


	Valuation £’000
CONSUMER STAPLES
Beverages
Diageo	68,463
Coca-Cola1	11,402
Britvic	9,935
	89,800
Food Producers
Nestle1	28,750
Tate & Lyle	11,562
	40,312
Personal Care, Drug and Grocery Stores
Tesco	45,972
Unilever	45,954
Reckitt Benckiser	30,790
	122,716
Tobacco
British American Tobacco	91,507
Imperial Brands	48,641
	140,148
Total Consumer Staples	392,976
HEALTH CARE
Medical Equipment and Services
Smith & Nephew	8,514
	8,514
Pharmaceuticals and Biotechnology
AstraZeneca	56,160
GlaxoSmithKline	50,579
Merck1	21,064
Novartis1	18,287
Johnson & Johnson1	15,231
Sanofi1	12,689
	174,010
Total Health Care	182,524

1 Overseas listed

All classes of equity in any one company are treated as one investment.


	Valuation £’000		Valuation £’000
CONSUMER DISCRETIONARY		FINANCIALS
Retailers		Banks
Kingfisher	11,116	HSBC	53,014
DFS	3,900	Lloyds Banking	27,501
Halfords	3,558	Barclays	22,968
	18,574	Nationwide Building Society 10.25% Var Perp CCDS	9,331
Media			112,814
RELX	56,679	Investment Banking and Brokerage Services
	56,679	M&G	44,174
Household Goods and Home Construction		St. James's Place	30,636
Persimmon	26,641	Schroders	28,990
Taylor Wimpey	14,983	IG	25,548
	41,624	3i	22,915
Travel and Leisure		Brewin Dolphin	11,753
La Française des Jeux1	9,910	Rathbones	6,790
Young	2,754		170,806
	12,664	Life Insurance
Total Consumer Discretionary	129,541	Phoenix	42,308
		Legal & General	31,374
TELECOMMUNICATIONS		Prudential	13,201
Telecommunications Service Providers			86,883
Vodafone	27,861	Non-life Insurance
Verizon Communications1	23,824	Direct Line Insurance	28,694
Deutsche Telekom1	13,430	Munich Re1	19,248
Orange1	13,037	Sabre Insurance	10,275
	78,152	Beazley	8,978
Telecommunications Equipment		Hiscox	8,010
Cisco Systems1	8,780		75,205
	8,780	Total Financials	445,708
Total Telecommunications	86,932
		REAL ESTATE
UTILITIES		Real Estate Investment Trusts
Electricity		Land Securities	19,920
SSE	39,107	Segro	17,579
	39,107	British Land	12,295
Gas, Water and Multi-utilities			49,794
National Grid	44,794	Total Real Estate	49,794
Severn Trent	27,859
United Utilities	12,723	TECHNOLOGY
Pennon	7,334	Software and Computer Services
	92,710	Microsoft1	17,978
Total Utilities	131,817	Sage	10,848
			28,826
		Total Technology	28,826

		TOTAL INVESTMENTS	1,923,270

1 Overseas listed

All classes of equity in any one company are treated as one investment.

Historical Information

Total Return Performance to 30 June 2022


	1 year %	3 years %	5 years %	10 years %
NAV per ordinary share1	7.5	10.2	20.3	115.2
FTSE All-Share Index	1.6	7.4	17.8	94.6
AIC UK Equity Income sector average – NAV2	-1.5	8.2	16.7	114.0
IA UK Equity Income OEIC sector average	-0.5	7.6	11.4	94.1

Share Price Performance Total Return to 30 June 2022


Value of £1,000 with net income reinvested	1 year £	3 years £	5 years £	10 years £
The City of London Investment Trust plc3	1,077.4	1,094.4	1,197.6	2,101.2
FTSE All-Share Index	1,016.4	1,074.1	1,177.7	1,946.1
AIC UK Equity Income sector average	980.4	1,088.6	1,183.4	2,120.0
IA UK Equity Income OEIC sector average	994.8	1,076.4	1,113.8	1,941.2

Ten Year Net Asset Value and Dividend Record


Year ended	Net asset value per ordinary share (p)4	Net asset value per ordinary share (rebased)5	Net dividends per ordinary share (p)	Net dividends per ordinary share (rebased)5
30 June 2012	286.4	100.0	13.74	100.0
30 June 2013	339.1	118.4	14.30	104.1
30 June 2014	373.7	130.5	14.76	107.4
30 June 2015	382.7	133.6	15.30	111.4
30 June 2016	378.6	132.2	15.90	115.7
30 June 2017	416.1	145.3	16.70	121.5
30 June 2018	424.3	148.1	17.70	128.8
30 June 2019	416.3	145.4	18.60	135.4
30 June 2020	338.7	118.2	19.00	138.3
30 June 2021	384.1	134.1	19.10	139.0
30 June 2022	393.5	137.4	19.60	142.6

Historical dividend

Historical NAV

1) Net asset value per share total return with debt at fair value (including dividends reinvested)

2) AIC UK Equity Income sector size weighted average NAV total return (shareholders’ funds)

3) Share price total return using mid-market closing price

4) Net asset value per ordinary share is calculated after deducting all prior charges, including the preference and preferred ordinary stocks, at fair value

5) Rebased to 100 at 30 June 2012

Sources: Morningstar Direct, Janus Henderson, Refinitiv Datastream

A glossary of Alternative Performance Measures is on pages 86 and 87

Business Model

Our Purpose, Values and Culture

The Company’s purpose is to deliver growth in income and capital to shareholders by investing in equities listed on the London Stock Exchange. We do this by following a disciplined process of investment and by controlling costs and using borrowings to enhance returns.

Good governance is at the heart of any company and is integral to ensuring its success and sustainability as a business. The Board aspires to follow high standards of governance, with a culture based upon openness, mutual respect, integrity, constructive challenge and trust. The Board seeks always to act in the best interests of shareholders and other stakeholders, making the most effective use possible of the diversity of skills and experience of the Directors. This culture of openness and constructive challenge extends to the Board’s interaction with the Manager, being the Company’s most important service provider. The Board expects the Manager and all of the Company’s other service providers to hold values which align with the high standards promoted by the Board.

The Company has a number of policies and procedures in place to assist with maintaining a culture of good governance including those relating to Directors’ conflicts of interest, Directors’ dealings in the Company’s shares, bribery (including the acceptance of gifts and hospitality) and tax evasion. The Board assesses and monitors compliance with these policies regularly through Board meetings and the annual evaluation process.

Structure

The Company operates as an investment company. Under this structure, the Board delegates operational matters to specialised third-party service providers. Their performance is monitored and challenged by a Board of Directors which retains oversight of the Company’s operations.

The framework of delegation provides a cost-effective mechanism for delivering operations whilst allowing the Company to take advantage of the capital gains treatment afforded to investment trusts which are approved under Section 1158/9 of the Corporation Tax Act 2010 as amended (“s.1158/9”). The closed-ended nature of the Company enables the Fund Manager to take a longer-term view on investments and supports a fully invested portfolio as the Company has no redemptions to meet. A significant advantage over other investment fund structures is the ability to use leverage to increase returns for shareholders.

The Board comprises entirely non-executive Directors accountable to shareholders, who have the ability to remove a Director from office where they deem it to be in the interests of the Company.

The Company’s Status

The Company is registered as a public limited company, founded in 1891, and is an investment company as defined in Section 833 of the Companies Act 2006 (“the Act”). The Company is not a close company. It operates as an investment trust in accordance with s.1158/9 and has obtained approval from HMRC for its status. The Directors are of the opinion that the Company has conducted its affairs in compliance with s.1158/9 since approval was granted and intends to continue to do so.

The Company is listed on the Main Market of the London Stock Exchange and is subject to the Listing Rules, Prospectus Rules and Disclosure Guidance and Transparency Rules published by the Financial Conduct Authority (“FCA”). The Company is also listed on the Main Board of the New Zealand Stock Exchange and is subject to the NZX Listing Rules. The Company is a member of the Association of Investment Companies (“AIC”).

The Company and the Board are governed by its Articles of Association, amendments to which must be approved by shareholders by way of a special resolution.

Investment Objective

Investment Policy

Asset allocation

While the Company will mainly invest in equities, there is the flexibility to invest in debt securities, such as convertibles, corporate bonds or government debt, if it is deemed that these will, at a particular time or for a particular period, enhance the performance of the Company in the pursuit of its objective.

The Company has a portfolio invested predominantly in larger companies. Typically at least 60% of the portfolio by value will be invested in large companies (being companies with a market capitalisation greater than £5 billion at the time of investment). The remainder of the portfolio will be invested in medium-sized and small companies. No more than 20% of the portfolio will be invested in overseas listed stocks.

There are no set limits on sector exposures, although the Board regularly monitors the Company’s investments and the Manager’s investment activity. The Manager primarily employs a bottom-up value-based investment process to identify suitable opportunities and pays particular regard to cash generation and dividends.

The portfolio yield will usually be between 10% and 30% above the average dividend yield for the UK equity market. There may be some holdings, selected for their above average growth potential, which have a dividend yield lower than the market.

Gearing

The Company will at times utilise limited gearing, both short and long term, in order to enhance performance. Other than in exceptional market conditions, gearing will not exceed 20% of net asset value at the time of draw down of the relevant borrowings. Up to 10% of the net assets can be held in cash.

Selling traded options where the underlying share is held in the portfolio can be used to generate income. Buying and selling FTSE 100 Index Futures can be used to increase or reduce gearing.

Diversification

The Company achieves an appropriate spread of investment risk principally through a broadly diversified portfolio.

The Company will not invest more than 15% of its portfolio in any single investment on acquisition, nor will it invest more than 15% of the portfolio in any other UK listed investment trusts or investment companies.

Any material change to the investment policy would require the prior approval of both shareholders and the FCA.

Benefits

The Company’s business model offers numerous advantages:

a) it provides investors with access to a professionally and actively managed portfolio of assets;

b) it offers investors exposure to large UK companies;

c) it enables investors to spread the risks of investing;

d) it enhances returns to investors by operating as an approved investment trust meaning no capital gains tax is paid on the realisation of investments;

e) the closed end structure allows the Fund Manager to take a longer-term view on investments and remain fully invested;

f) the ability to draw on revenue reserves to support the payment of dividends;

g) the ability to use leverage to increase returns for investors; and

h) oversight by a Board of Directors wholly independent of the Manager.

Arrangements with the Manager

The Company qualifies as an Alternative Investment Fund (“AIF”) in accordance with the Alternative Investment Fund Manager Directive (“AIFMD”). The Board has appointed Janus Henderson Fund Management UK Limited (“JHFM”)* to act as its Alternative Investment Fund Manager. JHFM delegates investment management services to Janus Henderson Investors UK Limited* in accordance with an agreement which was effective from July 2014 and can be terminated on six months’ notice. Both entities are authorised and regulated by the Financial Conduct Authority, and form part of the Janus Henderson group of companies. References to “Janus Henderson” or the “Manager” refer to the services provided to the Company by the Manager’s group.

The management fee is 0.325% per annum of net assets under management. Fees are payable quarterly in arrears based on the level of net assets at the relevant quarter end. There is no performance fee arrangement in place.

Janus Henderson and its subsidiaries also provide accounting, company secretarial and general administrative services. Some of the administration and accounting services are carried out, on behalf of the Manager, by BNP Paribas Securities Services. Janus Henderson Secretarial Services UK Limited* acts as the Corporate Secretary.

*Janus Henderson Fund Management UK Limited, Janus Henderson Investors UK Limited and Janus Henderson Secretarial Services UK Limited changed their names in March 2022 from Henderson Investment Funds Limited, Henderson Global Investors Limited and Henderson Secretarial Services Limited respectively.

Investment Approach

Our Fund Manager, Job Curtis, has managed the Company’s portfolio since 1 July 1991. He is a member of Janus Henderson’s Global Equity Income team and is assisted by David Smith, Deputy Fund Manager. He manages the portfolio in a conservative way, focusing on companies with cash-generative businesses able to grow their dividends with attractive yields. The portfolio is well diversified, with some 71% invested in well-known blue chip UK-listed companies at the year end, but it remains biased towards international companies invested in economies likely to grow faster than the UK. In order to provide a stable and reliable income, the portfolio aims to provide shareholders with dividends between 10% and 30% higher than the FTSE All-Share Index.

The Fund Manager is committed to maintaining a diversified portfolio and has structured the portfolio so that shareholders stand to gain in the short term through quarterly dividends, while long-term capital appreciation is central to stock- picking decisions.

Liquidity and Discount Management

Our aim is for the Company’s share price to reflect closely its underlying net asset value, and also to reduce volatility and have a liquid market in the shares. The ability to influence this meaningfully over the longer term is, of course, limited. However, the Board intends, subject always to the overall impact on the portfolio, the pricing of other investment companies and general market conditions, to consider issuance and buybacks within a narrow band relative to net asset value. We believe that flexibility is important and that it is not in shareholders’ interests to have a specific issuance and buyback policy.

Borrowings

The Company has a borrowing facility of £120.0 million (2021: £120.0 million) with HSBC Bank plc, of which £16.3 million was drawn at the year end (2021: £10.0 million).

The Company has £114.2 million (2021: £114.1 million) (par value) of secured notes in issue (fair value of the loan notes: £101.1 million (2021: £128.5 million)).

The level of gearing at 30 June 2022 was 7.1% of net asset value (2021: 6.9%).

Diversity

It is the Company’s aim to have an appropriate level of diversity in the boardroom. The Board welcomes the recommendations from the FTSE Women Leaders Review on gender diversity on boards and the Parker Review about ethnic representation on boards, and is pleased to report that it is in compliance with their recommended targets.

The current Directors have a diverse range of experience and skills, bringing knowledge of investment management, financial markets, accounting and auditing, risk and governance, and marketing and distribution expertise to discussions on the Company’s business. At the date of this report, the Board comprises five Directors, of which three are male and two are female.

The Nominations Committee considers diversity generally when making recommendations for appointments to the Board, taking into account gender, social and ethnic backgrounds, cognitive and personal strengths, and experience. The overriding aim in making any new appointments is always to select the best candidate based on objective criteria and merit. See pages 49 and 50 for further details of the Board’s diversity policy and compliance with recommended diversity targets.

The Company has no employees and, therefore, has nothing further to report in respect of gender representation within the Company. Details of Janus Henderson’s diversity and inclusion initiatives can be found on its website at https://diversityproject.com/organisation/janus-henderson.

Promoting the Company’s Success

Section 172 statement

The Board regards a well-governed business as essential for the successful delivery of its investment proposition. The Directors carry out their duties under Section 172 of the Act to act in good faith to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to the likely consequences of any decisions in the longer term, the need to foster the Company’s wider stakeholders, the impact of the Company’s operations on the community and the environment and the desirability of the Company maintaining a reputation for high standards of business conduct.

The Company has no employees, premises, assets other than financial assets, or operations. Core activities are conducted through the Manager (Janus Henderson), with whom it maintains a close working relationship, and the Board holds the Manager to account for the smooth running of the Company’s day-to-day business. There is continuous engagement and dialogue between Board meetings, with communication channels remaining open and information, ideas and advice flowing freely between the Board and the Manager. The Board has also appointed other third-party service providers to enable the Company to operate as a listed investment company. Each service provider has an established track record and has in place suitable policies and procedures to ensure it maintains high standards of business conduct.

The Board retains responsibility for decisions over corporate strategy, corporate governance, risk and internal control assessment, investment performance monitoring and setting marketing budgets. It also determines the overall limits and restrictions for the portfolio, including gearing and asset allocation.

As an externally-managed investment company, the Board considers the Company’s key stakeholders to be its shareholders and investors, the Manager and other third-party service providers and the companies in which it invests. Wider stakeholders include the Company’s lenders and regulatory and legislative bodies. Engagement with the Company’s key stakeholders enables the Company to fulfil its purpose and the Directors to promote the long-term sustainable success of the Company for the benefit of shareholders as a whole.

The Directors are responsive to the views of shareholders and the Company’s wider stakeholders, who may contact the Board via the Corporate Secretary (please refer to page 92 for contact details). See pages 23 to 25 for further details on how the Board interacts with its key stakeholders.

For more information about the responsibilities with which the Board and its Committees are charged, please refer to the Corporate Governance Report (pages 39 to 45), the Audit Committee Report (pages 46 to 48), the Nominations Committee Report (pages 49 and 50), the Directors’ Remuneration Report (pages 51 to 54) and the Directors’ Report (pages 36 to 38) in addition to the Strategic Report. The schedule of matters reserved for the Board as well as the terms of reference for each of the Committees of the Board can be found on the Company’s website.

Engagement with Key Stakeholders

Shareholders’ assets are managed taking account of the Company’s stakeholders and their interests. The Board has mapped who the stakeholders are to support it in identifying and understanding them and fostering the appropriate level and form of interaction with them. Interaction is facilitated through meetings (both face-to-face and via video conferencing and other electronic means), seminars, presentations, publications and the Company’s website. Set out below are examples of the way the Board and the Company interacts with its stakeholders.


Stakeholders	Engagement	Outcome
Shareholders and investors	Shareholders rely on the Company to deliver sustainable and reliable returns on investment, with regular, ongoing income. The Board believes that its primary focus should be on providing an excellent service to its shareholders and it seeks to ensure that the Company is accessible and available. Regular updates on the Company and its activities are provided through: ● the Annual and Half Year Reports; ● the Manager’s monthly factsheets; ● Company announcements, including daily NAV announcements; ● the Company’s website, which includes video interviews with the Company’s Fund Manager, regular market commentary and investment insights and other relevant information to enhance investors’ understanding of the Company and its portfolio and prospects; ● use of social media channels (see page 92); and ● research notes from Kepler Partners (paid for by the Company and available to all investors). Shareholders are encouraged to attend and vote at the Company’s general meetings, including the AGM, where they have the opportunity to address questions directly to the Directors and the Fund Manager. Shareholders who cannot attend the AGM in person are invited to attend and raise questions online. The Chairman, Senior Independent Director, other members of the Board and the Fund Manager are available to meet with shareholders. The Manager’s sales and marketing team, the Broker and external marketing research provider (Kepler Partners) also meet with shareholders and analysts. The Fund Manager provides presentations to research analysts following the publication of the Company’s annual financial results. Feedback from all meetings is shared with the Board. The Fund Manager promotes the Company with the support of the Manager’s dedicated investment trust sales team and the Board makes additional spend available to support marketing activities aimed at raising the profile of the Company.	Clear communication of the Company’s strategy and performance against its objective helps shareholders to make informed decisions about their investments. Close interaction with shareholders enables the Board to run the Company in line with shareholders’ interests as a whole and for the Company’s long-term success. The Board is committed to maintaining open channels of communication with shareholders. Shareholders can raise issues or concerns with the Directors at any time by writing to the Chairman at the registered office. The Senior Independent Director is also available to shareholders if they have concerns that have not been addressed through the normal channels. Correspondence from shareholders is shared with the Chairman immediately and with the Board at each meeting. The Board is pleased to invite shareholders to attend the 2022 AGM. Further details are on page 37 and in the Notice of Meeting.


Stakeholders	Engagement	Outcome
Manager ● Fund management ● Sales and marketing ● Company secretarial ● Financial reporting ● Internal controls functions ● Investment accounting and administration (outsourced by Janus Henderson to BNP Paribas) ● Oversight of third- party service providers	The Board sets and oversees the parameters for the Manager’s activities, including asset allocation, gearing and risk management. The Board seeks to engage with the Manager in a collaborative and collegiate manner, encouraging open and constructive discussion and debate, whilst also ensuring appropriate and regular challenge. The Fund Manager and Deputy Fund Manager attend all Board meetings. The Board receives timely and accurate information from the Manager at meetings and engages with the Fund Manager, Deputy Fund Manager and Corporate Secretary between meetings, as well as with other representatives, as and when necessary. The Board meets with other key representatives of the Manager throughout the year to develop strategy, assess internal controls and risk management, and to discuss the sales and marketing activities to promote the success of the Company and raise its profile. Throughout the course of the Covid-19 pandemic the Board was in regular contact with the Manager, receiving updates on areas such as portfolio activity, gearing and the impact on income and the Company’s ability to meet its investment objective. The Board, with the assistance of the Nominations Committee, formally reviews the performance and terms of appointment of the Manager at least annually (see pages 44 and 50 for further details).	Successful management of the Company’s portfolio is essential for the Company to meet its strategic objectives and enable its long- term sustainable success, whilst effective provision of the ancillary services ensure the efficient running of the Company’s day-to-day affairs. The Company is well managed and the Board places great value on the expertise and experience of the Fund Manager to execute the investment objective and deliver returns for shareholders, and on the Manager’s internal controls and risk management. The portfolio activities undertaken by the Manager and the impact of decisions are set out in the Fund Manager’s Report on pages 12 to 15.
Service providers Including: ● Depositary and custodian ● Fund accountant and administrator (outsourced by Janus Henderson to BNP Paribas) ● Broker ● Registrar ● Auditor	The Board is conscious of the need to foster good business relationships with its suppliers. As an investment company, all services are outsourced to third-party service providers. The Manager maintains the overall day-to-day relationship with the service providers and reports back to the Board on performance. Each service provider has an established track record and has in place suitable policies and procedures to ensure it maintains high standards of business conduct. The Board regularly considers the support provided by the service providers, including quality of service, succession planning, costs and any potential interruption of service or other risks to provision. The Board evaluates the terms of engagement and the control environments in place at each service provider and, through the Nominations Committee, formally assesses their appointment annually.	The Company is supported by experienced and capable third parties for all the services required to be a well-functioning company and the costs are commensurate with the services provided. The Board is confident that Janus Henderson has developed and maintains good working relationships with all of the Company’s third-party suppliers.


Stakeholders	Engagement	Outcome
Investee companies (listed on pages 16 and 17)	The Board sets the investment objective and discusses stock selection, asset allocation and engagement with investee companies with the Fund Manager at each Board meeting.	The fund management team regularly conducts face-to-face and/or virtual meetings with portfolio companies’ management teams to enable them to understand current trading and prospects for their businesses. The Manager is a responsible investor and has a dedicated Governance and Responsible Investment Team that the Fund Manager can utilise when making investment decisions and voting.
Communities and the environment	The Board mandates the Manager, supported by its governance function, to engage with investee companies at the appropriate time on ESG matters in line with good stewardship practices. The Board is also conscious of the importance of providing an investment product which meets the needs of its investors, including retail investors and pensioners.	The Board is conscious of the need to take appropriate account of broader ESG concerns and to act as a good corporate citizen. The Board believes the Company provides an accessible, affordable and reliable investment for retail and institutional investors. A reliable dividend stream from a prudently invested fund is particularly important in an era of great uncertainty and an increasing requirement on individuals to organise their own pensions and investments.

Examples of stakeholder consideration

The Board is always mindful of the need to act in the best interests of stakeholders as a whole and to have regard to other applicable Section 172 factors and this forms part of the Board’s decision-making process. Examples of this can be seen in the year under review as follows.

Geopolitical tensions

Following Russia’s invasion of Ukraine and the international imposition of sanctions on Russian companies and individuals, the Fund Manager was in regular contact with the Chairman and the rest of the Board to report on the impact on the Company’s performance. The exposure of the portfolio to Ukraine and Russia was carefully reviewed, and the Fund Manager confirmed that the Company had no direct or indirect exposure in companies which could have significant financial interests in Russia.

Issuing and buying back the Company’s shares

As set out on page 21, the Board’s aim is for the Company’s share price to reflect closely its underlying net asset value, and also to reduce volatility and have a liquid market in the shares. The Board considers that it is in shareholders’ interests for the Company to be able to issue shares while they are trading at a premium to NAV and to buy back shares at a discount to NAV, because by doing so, the NAV is enhanced and some of the Company’s costs are spread across a larger asset base. This approach was reconfirmed at the annual strategy meeting of the Board. During the year, the Company has continued to issue shares, whilst no shares have been bought back.

Dividends paid to shareholders

As set out in its investment objective, the Board recognises the importance of dividend income to its shareholders. One of the advantages of an investment trust is the ability to retain surplus income. With the revenue reserves that have been built up over the years, the Company is able to draw on these to ensure that there is no disruption to dividends for shareholders. The capital reserve arising on investments sold is also available to fund the dividend, if necessary. As a result, the Board has been able to maintain its policy of increasing the total dividend each year, even in years when the dividend per share has not been covered by revenue earnings per share. In the year to 30 June 2022, the annual dividend has been increased by 2.6%. The dividends declared in respect of the year have been covered by income received in the year and no drawdown from the revenue reserve has been required.

E-communications with shareholders

The Board carried out a review of how it communicates with shareholders. The Companies Act 2006 includes provisions facilitating communications with shareholders in electronic form (e-communications) and by means of the Company’s website. The Board concluded from this review that many shareholders would welcome a proposal to reduce the Company’s increasing postage and printing costs by sending Annual and Half Year reports and other communications to them electronically. This proposal would also have a positive environmental impact. The Board appreciated that some shareholders would wish to continue to receive communications in printed form and there would be an option for them to request this.

Managing our Risks

The Board, with the assistance of the Manager, has carried out a robust assessment of the principal risks and uncertainties facing the Company, including those that would threaten its business model, future performance, solvency or liquidity and reputation.

The Board regularly considers the principal risks facing the Company and has drawn up a register of these risks. The Board has also put in place a schedule of investment limits and restrictions, appropriate to the Company’s investment objective and policy, in order to mitigate these risks as far as practicable. The principal risks which have been identified and the steps taken by the Board to mitigate these are set out in the table below. The principal financial risks are detailed in note 16 to the financial statements. Details of how the Board monitors the services provided by Janus Henderson and its other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal controls section of the Corporate Governance Report on pages 44 and 45.

Geopolitical risks had been identified as an emerging risk in the 2021 Annual Report. Given the events in Ukraine and the resulting potential global impact, including increased market volatility and cyber security risks, this was moved from emerging to principal risks during the year.


Principal risks	Trend	Mitigating measure
Geopolitical Heightened political tensions in and among a number of countries around the world have potential impacts, including increasing market volatility, risks to cyber security and on the supply of commodities, including oil and gas, and manufacturing components.		The Fund Manager keeps the global political and economic picture under review as part of the investment process.
Global pandemic The impact that the coronavirus pandemic or some future major health crisis could have on the Company’s investments and its direct and indirect effects, including the effect on the global economy.		The Fund Manager maintains close oversight of the Company’s portfolio, and in particular the dividend strategies of investee companies. Regular stress testing of the revenue account under different scenarios for dividends is carried out. The Board also maintains close oversight of the third-party service providers which assist in the administration of the Company.
Portfolio and market price Although the Company invests almost entirely in securities that are listed on recognised markets, share prices may move rapidly. The companies in which investments are made may operate unsuccessfully, or fail entirely. A fall in the market value of the Company’s portfolio would have an adverse effect on equity shareholders’ funds. The wider consequences of Brexit on employment and regulation together with resultant, adverse trade negotiations may impact the Company’s investments.		The Board reviews the portfolio at the seven Board meetings held each year and receives regular reports from the Company’s brokers. A detailed liquidity report is considered on a regular basis. The Fund Manager closely monitors the portfolio between meetings and mitigates this risk through diversification of investments. The Fund Manager periodically presents the Company’s investment strategy in respect of current market conditions. Performance relative to the FTSE All-Share Index, other UK equity income trusts and IA UK Equity Income OEICs is also monitored. The majority of the Company’s investments are multi- national companies with operations in local markets.
Dividend income A reduction in dividend income could adversely affect the Company’s dividend record.		The Board reviews income forecasts at each meeting. The Company has revenue reserves of £43.6 million (before payment of the fourth interim dividend) and distributable capital reserves of £326.6 million.
Investment activity, gearing and performance An inappropriate investment strategy (for example, in terms of asset allocation or the level of gearing) may result in underperformance against the Company’s benchmark.		At each meeting, the Board reviews investment performance, the level of gearing, the level of premium/discount, income forecasts and a schedule of expenses. It also has an annual meeting focused on strategy at which these matters are considered in more depth.


Principal risks	Trend	Mitigating measure
Tax and regulatory Changes in the tax and regulatory environment could adversely affect the Company’s financial performance, including the return on equity. A breach of s.1158/9 could lead to a loss of investment trust status, resulting in capital gains realised within the portfolio being subject to corporation tax. A breach of the Listing Rules could result in suspension of the Company’s shares, while a breach of the Companies Act 2006 could lead to criminal proceedings, or financial or reputational damage. The Company must also ensure compliance with the Listing Rules of the New Zealand Stock Exchange.		The Manager provides its services, inter alia, through suitably qualified professionals and the Board receives internal control reports produced by the Manager on a quarterly basis, which confirm legal and regulatory compliance. The Fund Manager also considers tax and regulatory change in his monitoring of the Company’s underlying investments.
Operational Disruption to, or failure of, the Manager’s or its Administrator’s (BNP Paribas Securities Services) accounting, dealing or payment systems or the Depositary’s records could prevent the accurate reporting and monitoring of the Company’s financial position. Cyber crime could lead to loss of confidential data. The Company is also exposed to the operational risk that one or more of its suppliers may not provide the required level of service.		The Board monitors the services provided by the Manager and its other suppliers and receives reports on the key elements in place to provide effective internal control. Cyber security is closely monitored and the Audit Committee receives regular presentations from Janus Henderson’s Chief Information Security Officer. The Board considers the loss of the Fund Manager as a risk but this is mitigated by the experience of the team at Janus Henderson as detailed on page 35.

Emerging risks

In addition to the principal risks facing the Company, the Board also regularly considers emerging risks, which are defined as potential trends, sudden events or changing risks which are characterised by a high degree of uncertainty in terms of the probability of them happening and the possible effects on the Company. Should an emerging risk become sufficiently clear, it may be moved to a significant risk.

The Company’s Viability

The AIC Code of Corporate Governance includes a requirement for the Board to assess the future prospects for the Company, and to report on the assessment within the Annual Report.

The Board considers that certain characteristics of the Company’s business model and strategy are relevant to this assessment:

i) The Board seeks to deliver long-term performance by the Company.

j) The Company’s investment objective, strategy and policy, which are subject to regular Board monitoring, mean that the Company is invested mainly in readily realisable, UK-listed securities and that the level of borrowings is restricted.

k) The Company is a closed end investment company and therefore does not suffer from the liquidity issues arising from unexpected redemptions.

l) The Company has an ongoing charge of 0.37%, which is lower than other comparable investment trusts.

Also relevant were a number of aspects of the Company’s operational agreements:

● The Company retains title to all assets held by the Custodian under the terms of formal agreements with the Custodian and Depositary.

● Long-term borrowing is in place, being 4.53% secured notes 2029, 2.94% secured notes 2049 and 2.67% secured notes 2046 which are subject to formal agreements, including financial covenants with which the Company complied in full during the year. The value of long-term borrowing is relatively small in comparison to the value of net assets, being 6.4%.

● Revenue and expenditure forecasts are reviewed by the Directors at each Board meeting. This includes stress testing of the forecast under different scenarios.

● Cash is held with approved banks.

In addition, the Directors carried out a robust assessment of the principal risks and uncertainties which could threaten the Company’s business model, including future performance, liquidity and solvency, and considered emerging risks that could have a future impact on the Company.

The principal risks identified as relevant to the viability assessment were those relating to investment portfolio performance and its effect on the net asset value, share price and dividends, and threats to security over the Company’s assets. The Board took into account the liquidity of the Company’s portfolio, the existence of the long-term fixed rate borrowings, the effects of any significant future falls in investment values and income receipts on the ability to repay and renegotiate borrowings, grow dividend payments and retain investors and the potential need for share buybacks to maintain a narrow share price discount.

The Directors assess viability over five-year rolling periods, taking account of foreseeable severe but plausible scenarios. In coming to this conclusion, the Directors have considered the aftermath of the Covid-19 pandemic and heightened macroeconomic uncertainty following Russia’s invasion of Ukraine, in particular the impact on income and the Company’s ability to meet its investment objective. The Directors do not believe that they will have a long-term impact on the viability of the Company and its ability to continue in operation, notwithstanding the short-term uncertainty these events have caused in the markets and specific short-term

issues, such as energy, supply chain disruption, inflation and labour shortages.

The Directors believe that a rolling five-year period best balances the Company’s long-term objective, its financial flexibility and scope with the difficulty in forecasting economic conditions affecting the Company and its shareholders.

Based on their assessment, and in the context of the Company’s business model, strategy and operational arrangements set out above, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five-year period to June 2027.

Measuring our Performance

In order to measure the success of the Company in meeting its objective and to evaluate the performance of the Manager, the Directors take into account the following Key Performance Indicators (“KPIs”):


KPI	Action
Performance against market indices	The Board reviews and compares, at each meeting, the performance of the portfolio as well as the net asset value and share price for the Company and the FTSE All-Share Index. During the year under review, the Company’s net asset value outperformed the Index by 5.9% (2021: underperformed by 1.5%) on a total return basis.


Performance against the Company’s peer group	The Company is included in the AIC UK Equity Income sector. The Board considers the size-weighted average net asset value total return of its AIC peer group at each Board meeting. During the year under review, the Company outperformed the peer group by 9.0% (2021: underperformed by 6.4%).

1 AIC UK Equity Income sector NAV total return calculated on a simple average basis (see Glossary on page 88)


KPI	Action
Performance against the OEIC sector	The Board considers the performance of the portfolio against the IA UK Equity Income OEIC sector. During the year under review, the Company outperformed the OEIC sector by 8.0% (2021: underperformed by 5.4%).


Premium/discount to net asset value	The Board’s aim is for the Company’s share price to reflect closely its underlying net asset value. At each meeting, the Board monitors the level of the Company’s premium/discount to NAV per share and reviews the average premium/discount for the Company’s AIC sector. At 30 June 2022, the Company’s shares were trading at a premium of 1.8% to NAV (2021: 1.5% premium) with debt at fair value.


Ongoing charge	The Board regularly reviews the ongoing charge and monitors Company’s expenses. For the year ended 30 June 2022, the ongoing charge as a percentage of shareholders’ funds was 0.37% (2021: 0.38%).

The charts and data on pages 2 and 3 also on page 18 show how the Company has performed against these KPIs. A glossary of terms and Alternative Performance Measures is included on pages 86 to 88.

2 Excluding British & American Investment Trust PLC

Environmental, Social and Governance Matters (“ESG”)

How we integrate Environmental, Social and Governance considerations in our investment decisions

The Board believes that integrating ESG into investment decision-making and ownership practices is an important factor for delivering the investment outcomes our shareholders seek. ESG considerations are therefore a fully embedded component of the investment process employed by the Fund Manager, and the wider Janus Henderson investment teams.

Defining ESG

Environmental factors include climate change, use of natural resources, pollution, waste management, water usage and deforestation.

Social factors include corporate culture, diversity, health and safety, community relations and supply chain management.

Governance factors include business ethics, board composition, remuneration and shareholder rights.

Investment considerations

Sustainability of business models is crucial to the Company’s investment strategy. The Company’s investment philosophy is valuation driven, with a dividend yield considered the most important measure of value. As such, a considerable amount of time is spent by the Fund Manager identifying fundamental factors, including ESG factors which may impact profits, cash flow and dividends and ensuring that investee companies have robust policies and processes in place to manage these.

While the Fund Manager does not specifically exclude any company based on ESG considerations, the Fund Manager would seek to avoid companies where ESG risks are not sufficiently considered or managed. As the Fund Manager strives to understand all drivers of company performance, he also strives to understand the risks. An evaluation of ESG factors is integral to this.

Governance is a key part of fundamental factor analysis with good corporate governance supportive of long-term decision-making and investment returns. The significance of environmental and social factors can vary depending on the sector and the region in which a company operates. Nonetheless, each ESG factor, in addition to the quantitative and qualitative assessments, is an important consideration when evaluating the opportunity in an equity investment.

Fundamental factors considered vary, but may include:


Financial Analysis	Dividend sustainability, free cash flow, operating margin, balance sheet strength, leverage, profitability, earnings growth.
Qualitative Evaluation	Competitive position, industry trends, business volatility, business model, barriers to entry, exposure to disruption.
Environmental	Pollution, carbon emissions, water usage, waste management, resource use, sustainable sourcing.
Social	Health and safety, employee relations, diversity and inclusion, employee development, data privacy, supply chain management.
Governance	Shareholder alignment, board independence, shareholder rights, business ethics, voting structure, remuneration, board experience, accounting standards.
Valuation	Dividend yield, free cash flow, price to earnings ratio (“P/E”), earnings per share (“EPS”), enterprise value/earnings before interest, tax, depreciation and amortisation (“EV/EBITDA”) and dividend cover.

The Manager engages Sustainalytics, a leading firm researching and rating ESG factors globally, to support investment research. Sustainalytics can also be used to monitor the holdings within the Company and analyse its overall ESG risk exposure. Analysis by Sustainalytics shows the Company’s portfolio as at 30 June 2022.

Overall ESG risk rating

Source: Sustainalytics, City of London and index weights as at 30 June 2022. Sustainalytics risk data as at 13 July 2022

The ESG risk rating measures the unmanaged ESG risk of a business and the degree to which the business’ economic value is at risk from ESG factors. A lower score indicates less exposure to ESG risk. It is important to note that all companies have some level of systemic ESG risk which cannot be managed. The risk ratings are aggregated for

the City of London portfolio and the benchmark, the FTSE All-Share Index. The Company’s ESG risk is 3.6% lower than the benchmark, as assessed by Sustainalytics.

ESG risk category

Source: Sustainalytics, City of London and index weights as at 30 June 2022. Sustainalytics risk data as at 13 July 2022

The Sustainalytics ESG risk categories sort securities into five groups based on a company’s exposure to ESG risks which could cause material financial impact. The Company’s portfolio has no exposure to companies considered to have severe exposure to material ESG risks and less exposure to high-risk stocks than the benchmark. The Company’s portfolio is more weighted towards lower ESG risk stocks than the benchmark.

Carbon emissions

Source: ISS, as at 30 June 2022

Note: ISS Climate Impact data including Scope 1 (direct), Scope 2 (purchased electricity), Scope 3 (other indirect not included in Scope 2)

tCO2e: tonnes of carbon dioxide equivalent

The above chart shows the direct and indirect carbon emissions of the holdings in both the Company and the benchmark. These emissions are based on the assets under management of the Company compared to an equivalent portfolio of assets under management invested in the benchmark. Scope 1 and 2 emissions are the direct emissions from a company’s operations and scope 3 emissions are indirect emissions. The Company’s direct and indirect carbon emissions are 21% lower than the benchmark.

Engagement and stewardship

Stewardship is a fundamental part of the Manager’s long- term, active approach to investment management. Strong ownership practices, including engagement with management and boards, can help protect and enhance long-term shareholder value. Janus Henderson supports the UK Stewardship Code and is a founding member of the UN Principles of Responsible Investment (“UN PRI”). Additionally, Janus Henderson is a supporter of a number of broader ESG initiatives such as the Access to Medicine Index which aims to improve availability of healthcare in developed and emerging markets and Climate Action 100+, an investor-led initiative to engage with heavily emitting companies to reduce their greenhouse gas emissions.

As a part of the research process, portfolio managers and analysts meet frequently with company management, senior executives and boards, with Janus Henderson conducting thousands of meetings per year. These meetings typically occur prior to initiating a position and throughout the holding period. The portfolio managers develop long-term relationships with the management of firms in which they invest. Should concerns arise over a firm’s practices or performance, they would seek to leverage these constructive relationships by engaging with company management or express their views through voting on management or shareholder proposals. Escalation of engagement activities depends upon a company’s individual circumstances.

Voting

The Board believes that voting at general meetings is an important aspect of corporate stewardship, and a means of signalling shareholder views on board policy, practices and performance. The Board has delegated responsibility for voting the rights attached to the shares held in the Company’s portfolio to the Manager, who actively votes at shareholder meetings and engages with companies as part of the voting process.

Voting decisions are guided by the best interests of the investee companies’ shareholders and made in consultation with the Fund Manager, who has an in-depth understanding of the respective company’s operations. Voting decisions are taken in keeping with the provisions of the Manager’s ESG Investment Principles, which set out the Manager’s approach to corporate governance, corporate responsibility and compliance with the Stewardship Code, and are publicly available on the Manager’s website at www.janushenderson.com. To retain oversight of the process, the Directors regularly receive reports on how the Manager has voted the shares held in the Company’s portfolio, and they review the ESG Investment Principles at least annually.

In the period under review, the shares in the Company’s portfolio were voted in respect of 94 meetings. The level of governance in leading global companies is generally of a high standard in terms of best practice, which meant support in favour of the resolutions proposed by management was warranted. However, in respect of 20 resolutions (<2% of the resolutions proposed), support was not warranted and, following discussion between the Fund Manager and Janus Henderson’s governance team, the shares were voted against the investee board recommendation. On occasion, the Fund Manager takes voting decisions after consultation with the Chairman on behalf of the Board.

As an active manager, Janus Henderson’s preference is to engage with management and boards to resolve issues of concern rather than to vote against shareholder meeting proposals. This approach is more likely to be effective in influencing company behaviour. The Fund Manager therefore actively seeks to engage with companies throughout the year and in the lead up to the annual shareholder meeting to discuss any potentially controversial agenda items. However, where he believes that proposals are not in shareholder interests or where engagement proves unsuccessful, he will vote against.

Voting record

In terms of the resolutions not supported, these covered two predominant themes relating to executive remuneration and shareholder proposals.

Source: Janus Henderson using Institutional Shareholder Services (“ISS”) categories

Note: Some meetings had more than one vote against management.

* We routinely vote against proposals labelled ‘other business’. Many companies put forward proposals labelled ‘other business’. This is a request to allow the board and shareholders to raise other issues and discuss them at the meeting. It is often a routine request, however as it could potentially lead to subsequent approval of items without prior disclosure to minority shareholders, we routinely vote against these items

The environment

As an investment company, the Company’s own direct environmental impact is minimal. The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013. For the same reasons, the Company considers itself to be a low energy user under the Streamlined Energy & Carbon Reporting (“SECR”) regulations and therefore is not required to disclose energy and carbon information.

The Manager recognises the importance of managing its operational activities in a sustainable way and minimising any adverse impact on the environment. In 2019 Janus Henderson committed to reducing its carbon footprint by 15% per full-time employee over three years based on 2018 consumption. In 2021 Janus Henderson reached this target and set new five-year targets in 2022 in line with guidance from the Science-Based Target Initiative to reduce Scope 1 (fuel) and Scope 2 (electricity) emissions by 29.4%, as well as Scope 3 (business travel, hotel stays, freight, paper consumption, water, waste) operational emissions by 17.5%.

In addition to this, Janus Henderson has maintained a CarbonNeutral® certification since 2007 and offsets all its operational Scope 1, Scope 2 and Scope 3 emissions each year. Through this process, Janus Henderson has invested in a variety of offset projects around the world, delivering financial support to essential renewable energy, forestry and resource conservation projects that support reductions in greenhouse gas emissions. All projects Janus Henderson supports have been classified as ‘additional’ by an independent third party, meaning that they would not happen without the sale of carbon credits.

Janus Henderson discloses its carbon emissions annually through regulatory and voluntary reporting frameworks, including SECR and CDP, as well as in its annual report and in its 2021 Impact Report. Janus Henderson’s 2021 Impact Report provides more information.

Business ethics

As the Company’s operations are delegated to third-party service providers, the Board seeks assurances, at least annually, from its suppliers that they comply with the provisions of the UK Modern Slavery Act 2015 and maintain adequate safeguards in keeping with the provisions of the Bribery Act 2010 and Criminal Finances Act 2017.

Approval

The Strategic Report has been approved by the Board. On behalf of the Board

Sir Laurie Magnus CBE

Chairman

16 September 2022

Governance

Directors and Fund Manager

Directors

Sir Laurie Magnus CBE Position: Chairman of the Board and Nominations Committee

Date of Appointment:

1 March 2020 (Chairman on 27 October 2020)

Skills and Experience: Sir Laurie has over 40 years of experience in corporate finance markets and over 15 years as a member of investment supervisory bodies, including as a director of various investment trusts. He has held senior positions at financial institutions including Samuel Montagu, Phoenix Securities, Donaldson Lufkin & Jenrette and Lexicon Partners (latterly as Chairman prior to its merger with Evercore). He is currently a non- executive adviser to Evercore’s European business.

Current External Appointments:

Chairman of Pantheon International plc. In the not-for-profit sector, Sir Laurie is Chairman of The Historic Buildings and Monuments Commission for England (Historic England) and a trustee of English Heritage Trust.

Samantha Wren

Position: Chair of the Audit Committee

Date of Appointment:

1 September 2015 (Chair of the Audit Committee on 7 July 2016)

Skills and Experience: Samantha has extensive accounting and auditing experience. She was the Group Chief Finance Officer and Chief Operating Officer of NEX Group plc, having previously held senior finance roles at its predecessor company, ICAP plc. Prior to ICAP plc, she held several senior finance roles at the gaming group, The Rank Group plc, where she was also a Director of the Rank Pension Plan Trustee Limited. She qualified as a Chartered Management Accountant at Rentokil Initial plc.

Current External Appointments:

Chief Executive of IPGL Limited, a privately-owned investment company and a non-executive Director of Chapel Down Group plc, where she is also chair of the remuneration committee.

Robert Holmes (Ted)

Position: Director

Date of Appointment:

1 January 2018

Skills and Experience: Ted has a strong background in investment management. Ted joined the Board following a twenty-year career at UBS Asset Management. During that time, he worked as a managing director in both the Chicago office (previously Brinson Partners) and London office (previously Phillips and Drew) in a variety of positions, from analyst to European Head of Equities. Prior to UBS, he worked for Ernst & Young where he earned his Certified Public Accountant license. He has an MBA from the University of Chicago Booth School of Business and is a qualified Chartered Financial Analyst.

Current External Appointments:

Director of Blue Ocean Investment Partners Limited.

All Directors are independent of Janus Henderson.

All Directors are members of the Nominations Committee.

The Audit Committee consists of Samantha Wren, Ted Holmes, Clare Wardle and Ominder Dhillon.

Clare Wardle

Position: Senior Independent Director

Date of Appointment:

1 November 2019

Skills and Experience: Clare brings to the Board considerable international experience in risk, governance, competition and compliance. Between 2010 and May 2016, Clare played a leading role in many development and expansion projects as Group General Counsel at Kingfisher – Europe’s largest home improvement retail group. She is the Senior Independent Director of Modern Pentathlon GB. Before joining Kingfisher, Clare was Company Secretary and General Counsel of Tube Lines Limited and prior to this she was Head of Post Office Ltd Legal. She was also formerly a non-executive Director of ViaCode Limited, Chair of Basketball England and a trustee of the Friendly Almshouses. Clare was called to the bar in 1984, joined Lovells in 1986 and moved to the Post Office in 1996.

Current External Appointments:

General Counsel and Company Secretary of Coca-Cola Europacific Partners plc, which she joined in May 2016.

Ominder Dhillon

Position: Director

Date of Appointment:

1 September 2021

Skills and Experience: Ominder brings to the Board strong investment knowledge across public and private markets, especially in regard to sustainable investing, sales and marketing expertise and a good understanding of governance and risk management. He was, until January 2020, Global Head of Institutional Distribution at M&G plc. Prior to that, from 2011 to 2015, he was Head of Distribution at Impax Asset Management. He was also formerly Head of UK and Ireland at Fidelity International and Director of Institutional Sales at Scottish Widows Investment Partnership.

Current External Appointments:

Non-executive Director of Fidelity Special Values PLC and trustee of UK charity, Facing History and Ourselves.

Fund Manager

Job Curtis has been City of London’s Fund Manager since 1 July 1991. After graduating from Oxford University in 1983 with a BA Hons in Philosophy, Politics and Economics, he joined Grieveson, Grant stockbrokers as

a trainee. In 1985, he joined Cornhill Insurance as an assistant fund manager and then moved to Touche Remnant in 1987 where he became a fund manager. Touche Remnant was taken over by Henderson Group plc in 1992 and Job is currently a member of Janus Henderson’s Global Equity Income team.

Deputy Fund Manager

David Smith is a Fund Manager on the Janus Henderson Global Equity Income team, a position he has held since 2008. David manages Henderson High Income Trust plc, the UK portfolio of The Bankers Investment Trust PLC and a number of UK equity institutional funds. He joined Janus Henderson in 2002, initially working in operations and progressing to the UK Equities team, and is now part of the Global Equity Income team.

David graduated with a BSc degree (Hons) in Chemistry from Bristol University. He holds the Investment Management Certificate and the Chartered Financial Analyst designation.

Directors’ Report

The Directors present their report and the audited financial statements for the year ended 30 June 2022.

The Investment Portfolio on pages 16 and 17, Corporate Governance Statement, Audit Committee Report and Nominations Committee Report on pages 39 to 50, Statement of Directors’ Responsibilities on page 55 and Securities Financing Transactions, Alternative Performance Measures and other information on pages 84 to 92 form part of the Directors’ Report.

Results and Dividends

The results for the year are set out in the financial statements. Two interim dividends of 4.80p each and two interim dividends of 5.00p each, totalling 19.60p per share, have been declared and paid in respect of the year to 30 June 2022, an increase of 2.6% over the previous year. See note 10 on page 73 for more information. No final dividend is being proposed.

A review of the year and the outlook for the forthcoming year can be found in the Strategic Report.

Directors

The Directors of the Company are listed on pages 34 and 35. All served throughout the period under review with the exception of Ominder Dhillon, who was appointed as a Director on 1 September 2021. Martin Morgan retired from the Board on 28 October 2021.

In accordance with the recommendations of the AIC Code of Corporate Governance, all Directors of the Board will offer themselves for re-election at the forthcoming Annual General Meeting.

The beneficial interests of the current Directors and their connected persons in the securities of the Company as at 30 June 2022 are set out in the Directors’ Remuneration Report on page 53. Details of Directors’ insurance and indemnification are set out on page 43.

Share Capital

There are no restrictions on the transfer of the Company’s share capital and there are no shares or stock which carry specific rights with regards to control of the Company. The Company is not aware of any agreements or arrangements between holders of securities which would result in restrictions on the transfer of securities or voting rights.

The Company’s equity and non-equity share capital comprises:

Ordinary shares of 25p nominal value each

The voting rights of the ordinary shares on a poll are one vote for every 15 shares held. At the beginning of the year, there were 445,624,868 ordinary shares in issue. During the year, 14,015,000 new ordinary shares with a nominal value of £3,503,750 (representing 3.1% of the number of shares in issue at the beginning of the year) were issued to Cenkos Securities plc at a price range of 386.5p to 425.5p for total proceeds (net of commissions) of £57,050,000. No shares were bought back during the year.

At 30 June 2022, the number of ordinary shares in issue (with voting rights) was 459,639,868. There are no shares in treasury.

5,590,000 new shares have been issued since 30 June 2022 and up to 14 September 2022, being the last practicable date prior to publication of the Annual Report. No shares have been bought back since the year end.

Cumulative first preference stock

The voting rights of the first preference stock on a poll are one vote per £10 of stock held. At 1 July 2021 and at 30 June 2022 there was £301,982 of first preference stock in issue.

Non-cumulative second preference stock

Second preference stockholders have no rights to attend and vote at general meetings (except on the winding-up of the Company or if dividends are in arrears). At 1 July 2021 and at 30 June 2022 there was £507,202 of second preference stock in issue.

Non-cumulative preferred ordinary stock

The voting rights of the preferred ordinary stock on a poll are one vote per £20 of stock held. At 1 July 2021 and at 30 June 2022 there was £589,672 of preferred ordinary stock in issue.

Further details on the first and second preference stock and the preferred ordinary stock are contained in note 15 on pages 75 and 76.

Total voting rights

At 30 June 2022, the total voting rights in the Company were 30,702,339, comprising 30,642,657 ordinary share voting rights (99.8%), 30,198 first preference stock voting rights (0.1%) and 29,484 preferred ordinary stock voting rights (0.1%).

Shareholder authorities

The Directors seek annual authority from the shareholders to allot new ordinary shares, to dis-apply the pre-emption rights of existing shareholders and to buy back, for cancellation or to be held in treasury, the Company’s ordinary shares. In addition, the Directors seek annual authority to buy back and cancel the Company’s preferred and preference stocks.

At the annual general meeting held on 28 October 2021, the Directors were granted authority to allot up to 44,654,984 ordinary shares (with an aggregate nominal amount of £11,163,746) for cash and to repurchase 66,937,825 ordinary shares (with a nominal value of £16,734,456) for cancellation or to be held in treasury. 18,680,000 shares have been issued under this authority. During the year and up to the date of this report, the Directors have not bought back any preferred or preference stocks.

The Directors will once again be seeking to renew the authorities to allot and repurchase the ordinary shares at the upcoming Annual General Meeting, when the existing authorities will expire.

The Board’s aim is for the Company’s share price to reflect closely its underlying net asset value and have a liquid market in the ordinary shares. For this reason, the Board has, when appropriate, sought to utilise the Company’s ability to issue additional ordinary shares to satisfy investor appetite and smooth share price volatility by preventing the build-up of excessive demand for the ordinary shares. By issuing the shares at a premium to NAV, the Board seeks to protect the interests of existing shareholders so they benefit from an enhancement to NAV, to increase liquidity and to spread the fixed costs of the Company over a larger asset base. The Board also seeks to ensure that the price at which new ordinary shares are issued remains attractive to potential investors.

The Directors believe that, from time to time and subject to market conditions, it continues to be in the shareholders’ interests to buy back the Company’s shares when they are trading at a discount to the underlying net asset value per share. The Company may utilise the authority to purchase shares by either a single purchase or a series of purchases when market conditions allow, with the aim of maximising the benefit to shareholders. Authority will also be sought to renew the current authorities, which expire at the upcoming Annual General Meeting, to repurchase the preferred and preference stocks.

Holdings in the Company’s Shares

There are no declarations of interests in the voting rights of the Company as at 30 June 2022 in accordance with the Disclosure Guidance and Transparency Rules of the FCA.

No changes have been notified in the period from 1 July 2022 to 14 September 2022.

Fund Manager’s Interests

Job Curtis, the Fund Manager, has a beneficial interest in 311,607 shares and a non-beneficial interest in 21,527 shares.

Related Party Transactions

The Company’s transactions with related parties in the year were with the Directors and the Manager. There were no material transactions between the Company and its Directors during the year and the only amounts paid to them were in respect of expenses and remuneration for which there were no outstanding amounts payable at the year end. Directors’ shareholdings are disclosed on page 53.

In relation to the provision of services by the Manager, other than fees payable by the Company in the ordinary course of business and the provision of marketing services, there were no material transactions with the Manager affecting the financial position of the Company during the year under review. More details on transactions with the Manager, including amounts outstanding at the year end, are given in note 23 on page 82.

Financial Risk Management

The principal risks and uncertainties facing the Company are set out on pages 26 and 27. The principal financial risks and the Company’s policies and procedures for managing these risks are set out in note 16 to the financial statements on pages 76 to 80.

Greenhouse Gas Emissions

The Company’s environmental statements are set out in the Strategic Report on pages 30 to 32.

Annual General Meeting

The Annual General Meeting will be held on 27 October 2022 at 2.30pm. The Board invites shareholders to attend the meeting at the registered office at 201 Bishopsgate, London EC2A 3AE, or via Zoom webinar connection if shareholders would prefer not to travel. The Fund Manager will present his review of the year and thoughts on the future.

There will be live voting for those physically present at the AGM. However, due to technical restrictions, the Company cannot offer live voting by Zoom, and the Board therefore requests all shareholders who cannot attend physically to submit their votes by completing a Form of Proxy. Shareholders with shares held in their own names will receive a Form of Proxy enabling them to vote; shareholders holding shares through nominee accounts, such as through a share dealing service or platform, should contact their provider directly and ask them to submit the proxy votes on their behalf.

Instructions for attending the Meeting and details of resolutions to be put to the Annual General Meeting are included in the Notice of Meeting sent with this Annual Report and are on the Company’s website. If shareholders would like to submit any questions in advance of the Meeting, they are welcome to send these to the Corporate Secretary at [email protected].

Any change to the format of the Annual General Meeting will be notified to shareholders via a Regulatory Information Service announcement and the Company’s website.

Directors’ Statement as to Disclosure of Information to Auditors

Each of the Directors who were members of the Board at the date of approval of this report confirms that, to the best of his or her knowledge and belief, there is no information relevant to the preparation of the Annual Report of which the Company’s Auditors are unaware and he or she has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Company’s Auditors are aware of that information.

Reappointment of Auditors

PricewaterhouseCoopers LLP have indicated their willingness to continue in office as Auditors to the Company and a resolution proposing their reappointment and authorising the Audit Committee to determine their remuneration for the ensuing year will be put to shareholders at the Annual General Meeting. Further information in relation to their reappointment can be found in the Audit Committee Report on pages 46 to 48.

Listing Rule 9.8.4

Listing Rule (“LR”) 9.8.4 requires the Company to include certain information in a single identifiable section of the Annual Report or a cross reference table indicating where the information is set out. The Directors confirm that there are no disclosures to be made in this regard, other than in accordance with LR 9.8.4(7), the information for which is detailed on page 36 under Share Capital.

Securities Financing Transactions

As the Company undertakes securities lending, it is required to report on securities financing transactions (as defined in Article 3 of Regulation (EU) 2015/2365, securities financing transactions include repurchase transactions, securities or commodities lending and securities or commodities borrowing, buy-sell back transactions or sell-buy back transactions and margin lending transactions). In accordance with Article 13 of the Regulation, the Company’s involvement in and exposures related to securities lending for the accounting period ended 30 June 2022 are detailed on pages 84 and 85.

Approval

The Directors’ Report has been approved by the Board. By order of the Board

Janus Henderson Secretarial Services UK Limited

Corporate Secretary

16 September 2022

Corporate Governance Report

Corporate Governance

The Board is accountable to shareholders for the governance of the Company’s day-to-day affairs and is pleased to report to shareholders on the Company’s governance arrangements and how the principles of the applicable codes have been applied during the year under review.

Applicable Corporate Governance Codes

The Company maintains a premium listing on the London Stock Exchange and is therefore required to report on how the principles of the 2018 UK Corporate Governance Code (“UK Code”) have been applied. Being an investment company, a number of the provisions of the UK Code are not applicable as the Company has no executive directors or internal operations and all day-to-day activities are outsourced to external service providers. The Board has therefore considered the principles and recommendations of the Code of Corporate Governance published by the Association of Investment Companies in February 2019 (“AIC Code”). The AIC Code addresses the principles set out in the UK Code as well as additional principles and recommendations on issues that are of specific relevance to investment companies. The Financial Reporting Council (“FRC”) has endorsed the AIC Code and confirmed that, by following it, the boards of investment companies should fully meet their obligations in relation to the UK Code and paragraph 9.8.6 of the Listing Rules. The Board considers that reporting against the principles and provisions of the AIC Code provides more relevant information to shareholders in terms of its governance arrangements.

The Company also maintains a listing on the New Zealand Stock Exchange (“NZX”) where it is classified as a Foreign Exempt Issuer. The Listing Rules of the NZX require the Company to comply with the provisions applicable to its Home Exchange, being the London Stock Exchange, at all times, notifying the NZX of any changes pertinent to the listing on the Home Exchange and ensuring that any announcements made to the Home Exchange are simultaneously released to the market in New Zealand. Accordingly, the Company reports against its compliance with the AIC Code, rather than the NZX Corporate Governance Code.

The AIC Code and the UK Code can be found on the respective organisations’ websites: www.theaic.co.uk and www.frc.org.uk. The AIC Code includes an explanation of how it adapts the principles and provisions set out in the UK Code to make them relevant for investment companies.

Statement of Compliance

The Company has complied with the principles and provisions of the 2019 AIC Code throughout the year to 30 June 2022 except as set out below.

The Company has no chief executive or other executive directors. It therefore has no need to consider the remuneration of executive directors and has not reported further in respect of these provisions. In addition, the Company does not have any internal operations and therefore does not maintain an internal audit function. However, the Audit Committee considers the need for such a function at least annually (see page 44 for further information).

As the Company has no employees and has a small Board of solely non-executive Directors, the Board has not established a separate remuneration committee. The remuneration of Directors is dealt with by the Board as a whole.

Given the business model operated by the Company and the importance of the role of the Manager in ensuring the success of the Company, the Board believes that it remains its responsibility to keep under review the level of service provided by the Manager. It is assisted in this by the Nominations Committee, as set out in the Nominations Committee Report on pages 49 and 50. Accordingly, a separate Management Engagement Committee has not been formed.

The AIC Code includes two deviations from the UK Code permitting the Chairman of the Board to be a member of the Audit Committee and for his or her tenure to exceed nine years. The Company has not taken advantage of these provisions and continues to comply with the provisions of the UK Code in this respect.

Board Leadership and Purpose

The Board has overall responsibility for the Company’s affairs and for promoting the long-term success of the Company. The Board is collectively responsible for providing leadership, setting the investment objective and policy, appointing the Company’s third-party service providers, establishing a robust internal control and risk management system and monitoring the performance delivered by service providers within the established control framework. It is also responsible for setting the Company’s standards and values and for ensuring that its obligations to its shareholders and other stakeholders are understood and met. Information relating to the Company’s purpose and values can be found on page 20 and to the Board’s engagement with stakeholders on pages 23 to 25.

Operation of the Board

The Board meets formally at least seven times a year, with additional Board or Committee meetings arranged when required. The Directors have regular contact with the Manager between meetings. All matters that are not delegated to the Manager under the management agreement are reserved for the Board’s decision. The Board has a formal schedule of matters specifically reserved for its decision, which include strategy and management, structure and capital, financial reporting and controls, internal controls and risk management, communications and public relations, gearing, asset allocation, share price premium/discount, contracts, investment policy, finance, performance, corporate governance and Board membership and appointments.

Governance Structure

A copy of the schedule of matters reserved is available on the Company’s website.

At each meeting the Board reviews with the Manager the Company’s investment performance and compliance with the approved investment policy, and also considers financial analyses and other reports of an operational nature. The Board monitors compliance with the Company’s objective and is responsible for setting asset allocation, investment and gearing limits within which the Manager has discretion to act. The Board has responsibility for the approval of any investments in in-house funds managed or advised by the Manager. It also has adopted a procedure for Directors, in the furtherance of their duties, to take independent professional advice at the expense of the Company.

The Board has engaged third-party service providers to deliver the operations of the Company. Management of the investment portfolio has been delegated contractually to Janus Henderson, which also provides the day-to-day accounting, company secretarial, administrative, sales and marketing activities. The Company has appointed a Depositary, HSBC Bank plc, which in turn appoints the Custodian which is responsible for the safe custody of the Company’s assets. The Company has appointed a Registrar, Computershare Investor Services plc, to maintain the Register of Members and assist shareholders with queries about their holdings. Each of these principal contracts was entered into after full and proper consideration by the Board of the quality and cost of the services offered, including the control systems in operation in so far as they relate to the affairs of the Company. The Board and its Committees maintain oversight of the third-party service providers through regular and ad hoc reporting. The Board meets annually with representatives from the Depositary and Custodian to discuss amongst other matters performance, service levels, their value for money, information security and business continuity plans.

Full and timely management, financial, regulatory and other relevant information is provided to all Directors to allow them to discharge their responsibilities and to enable the Board (and its Committees) to function effectively. In particular, the Board receives and considers regular reports from the Manager and ad hoc reports and information are supplied to the Board as required. In addition, the Chairman is able to attend meetings of all the chairmen of the investment trust companies managed by Janus Henderson which provide a forum to discuss industry matters which would then be reported to the Board.

The Manager takes decisions as to the purchase and sale of individual investments. The Manager also ensures that all Directors receive, in a timely manner, all relevant management, regulatory and financial information. Representatives of the Manager attend each Board meeting enabling the Directors to probe further on matters of concern.

The Directors have access to the advice and services of the Corporate Secretary through its appointed representative who is responsible to the Board for ensuring that Board and Committee procedures are followed and that applicable rules and regulations are complied with. The proceedings at all Board and Committee meetings are fully minuted, in a process that allows any Director’s concerns to be recorded in the minutes.

The Corporate Secretary, Janus Henderson Secretarial Services UK Limited, is a subsidiary of Janus Henderson with its own reporting lines and audited internal controls. There are processes and controls in place to ensure that there is a clear distinction between the two entities, particularly when dealing with any conflicts or issues between the Company and Janus Henderson. Any correspondence from shareholders addressed to the Chairman or the Board received at Janus Henderson’s offices is forwarded to the Chairman in line with the established procedures in place. Any correspondence is submitted to the next Board meeting.

Janus Henderson and BNP Paribas Securities Services, which is engaged by Janus Henderson, have arrangements in place by which their staff may, in confidence, raise concerns about possible improprieties in relation to financial reporting or other matters. These arrangements are reviewed at least annually by the Audit Committee.

The Board, the Manager and the Corporate Secretary operate in a supportive, co-operative and open environment.

Division of Responsibilities


Role	Primary responsibilities
Shareholders/ investors	● Approving material changes to the Company’s investment policy. ● Making decisions regarding changes to the Company’s constitution. ● Electing and re-electing Directors to the Board, or removing them from office if deemed appropriate. ● Determining the overall limit for Directors’ remuneration.
Chairman	● Leading and managing Board business and ensuring the timely flow of information from service providers to the Board. He facilitates open, honest and constructive debate among Directors. ● Leading the Nominations Committee in developing succession planning and the identification of potential candidates for appointment to the Board (except when considering his own succession). ● Leading the Board in determining its governance framework, culture and values. ● Managing the relationship with the Manager. The role description for the Chairman is available on the Company’s website.
Senior Independent Director	● Fulfilling the role of sounding board for the Chairman and intermediary for the other Directors as necessary. ● Leading the performance evaluation of the Chairman. ● Acting as a channel of communication for shareholders in the event that contact through the Chairman is inappropriate. The role description of the Senior Independent Director is available on the Company’s website.
Independent non- executive Directors	● Providing constructive and effective challenge, especially to the decisions of the Manager. ● Scrutinising and holding to account the performance of the: – Fund Manager in meeting the investment objective. – Manager in the promotion of the Company and day-to-day smooth operations of the Company’s business. ● Providing strategic guidance and offering specialist advice.


Role	Primary responsibilities
Committee Chairs	● The leadership and governance of their Committee. ● Maintaining the relationships with specialist service providers delivering services within the remit of their Committee. ● Reporting on the activities of their Committee to the Board. ● Seeking approval from the Board for the responsibilities set out in their respective terms of reference.
Manager (AIFM)	● Promoting the Company’s investment proposition to professional and retail investors. ● Making the necessary reporting to the FCA regarding the Company’s status as an AIF. ● Providing accounting, company secretarial and other administrative services to the Company ensuring compliance with the applicable statutory and regulatory provisions. ● Coordinating the delivery of services provided by the Company’s other third-party service providers.
Fund Manager	● Selecting the stocks held within the portfolio. ● Diversification and risk management through stock selection and size of investment. ● Determining the volume and timing of acquisitions and disposals. ● Determining the frequency and level of gearing within the overall limits set by the Board.

The Board

Board composition

The Articles of Association provide that the total number of Directors shall not be less than three nor more than seven. As at the date of this report, the Board comprises five non-executive directors, whose biographies are included on pages 34 and 35. These biographies demonstrate the breadth of investment, financial, commercial and professional experience relevant to their positions as Directors. All Directors are considered by the Board to be independent of the Manager and free of any relationship which could materially interfere with the exercise of their independent judgement.

Chairman and Senior Independent Director

Sir Laurie Magnus was appointed as Chairman of the Board on 27 October 2020, following the retirement of Philip Remnant. Sir Laurie was independent on appointment in accordance with the criteria set out in the AIC Code and has no relationships that may create a conflict of interest between his interests and those of shareholders. Details of his other significant commitments can be found on page 34. Following review by the Nominations Committee as part of the performance evaluation, the Board is satisfied that Sir Laurie has sufficient time to devote to the Company.

The role of the Senior Independent Director is to fulfil the role of sounding board for the Chairman and intermediary for the other Directors as necessary and to lead the performance evaluation of the Chairman, as well as acting as a channel of communication for shareholders in the event that contact through the Chairman is inappropriate. Clare Wardle is the Senior Independent Director.

Role descriptions for the Chairman and Senior Independent Director are available on the Company’s website.

Director Appointment, Tenure and Training

Appointment and retirement

The Board may appoint Directors to the Board and any Director so appointed must stand for election by the shareholders at the next annual general meeting following appointment, in accordance with the Articles of Association and the AIC Code.

In keeping with the provisions of the AIC Code, the Board has adopted a policy for all Directors to retire and stand for re-election annually at each annual general meeting.

Under the Articles of Association, shareholders may remove a Director before the end of his or her term by passing an ordinary resolution at a general meeting.

The Board considers a potential candidate’s other commitments on appointment and then annually through the performance evaluation process to ensure that Directors have sufficient time to commit to the Company. A schedule of Directors’ other commitments is reviewed at each Board Meeting and Directors are required to seek the Chairman’s approval prior to accepting further appointments.

Tenure

In advance of each annual general meeting, the Nominations Committee will consider and make recommendations to the Board about whether it is appropriate for eligible Directors to be recommended for re-appointment, taking into account the results of the annual performance evaluation and the ongoing requirements of the AIC Code.

The Board’s policy for Directors, including the Chairman, is that they serve for no more than nine years, other than in exceptional circumstances. This ensures the regular refreshment of the Board and its Committees and forms an integral part of the Board’s succession planning.

Professional development

Newly appointed Directors are offered a bespoke induction programme which covers the legal and regulatory framework for investment companies and the operations of the Manager, including the compliance and risk management frameworks, accounting, sales and marketing, and other administration services provided by the Manager.

Directors are also provided on a regular basis with key information on the Company’s policies, regulatory and statutory requirements and internal controls. Changes affecting Directors’ responsibilities are advised to the Board as they arise. Directors also regularly participate in relevant training and industry seminars and may do so at the expense of the Company.

Directors’ individual training requirements are considered as part of the annual evaluation process which is led by the Chairman of the Board.

Directors’ Independence

The independence of the Directors is determined with reference to the AIC Code. The Nominations Committee considers the independence of each Director at least annually by reviewing their other appointments and commitments, as well as their tenure of service and any connection they may have with the Manager.

There were no contracts subsisting during or at the end of the year in which any Director is or was materially interested and which is or was significant in relation to the Company’s business. No Director has a contract of service with the Company and there are no agreements between the Company and its Directors concerning compensation for loss of office.

Following evaluation, the Nominations Committee determined that all Directors continued to be independent in character and judgement and that their individual skills, broad business experience and knowledge and understanding of the Company were of benefit to shareholders.

Directors’ Conflicts of Interest

The Company’s Articles of Association permit the Board to consider and, if it sees fit, to authorise situations where a Director has an interest that conflicts, or may possibly conflict, with the interests of the Company (“situational conflicts”). The Board has a formal system in place for Directors to declare situational conflicts to be considered for authorisation by those Directors who have no interest in the matter being considered. In deciding whether to authorise a situational conflict, the non-conflicted Directors must act honestly and in good faith with a view to the best interests of the Company and they may impose limits or conditions when giving the authorisation, or subsequently, if they think this is appropriate.

Any situational conflicts considered, and any authorisations given, are recorded in the relevant meeting’s minutes. The Board believes that the systems it has in place for reporting and considering situational conflicts continue to operate effectively. No situational conflicts of interest were considered during the year or up to the date of this report.

Directors’ Insurance and Indemnification

Directors’ and officers’ liability insurance cover is in place in respect of the Directors. Under the Company’s Articles of Association and subject to the provisions of UK legislation, a qualifying third-party indemnity may be provided to Directors in respect of costs which they may incur relating to the defence of any proceedings brought against them arising out of their positions as Directors, in which they are acquitted or judgement is given in their favour by the Court. No indemnity was given during the year or up to the date of this report.

Board Attendance

The table below sets out the number of scheduled formal Board and Committee meetings held during the year under review and the number of meetings attended by each Director. All Directors attended the 2021 Annual General Meeting. The number in brackets denotes the number of meetings each Director was entitled to attend.


	Board	Audit Committee	Nominations Committee
Number of scheduled meetings	7	3	1
Ted Holmes	7 (7)	3 (3)	1 (1)
Ominder Dhillon1	6 (6)	3 (3)	– (–)
Sir Laurie Magnus	7 (7)	n/a	1 (1)
Martin Morgan2	3 (3)	n/a	1 (1)
Clare Wardle	7 (7)	3 (3)	1 (1)
Samantha Wren	7 (7)	3 (3)	1 (1)

1 Appointed 1 September 2021

2 Retired 28 October 2021

Notes:

Sir Laurie Magnus attended each of the Audit Committee meetings by invitation.

An additional Nominations Committee meeting and Board meeting were held in relation to the appointment of a new Director, attended by all Directors.

The Insider Committee did not meet during the year

Committees of the Board

The Board has two principal Committees: the Audit Committee and the Nominations Committee. The terms of reference for these committees are available on the Company’s website. The Company has also constituted an Insider Committee to assist the Board in meeting its obligations under the Market Abuse Regulation.

The Audit Committee Report can be found on pages 46 to 48.

The Nominations Committee Report can be found on pages 49 and 50.

Continued Appointment of the Manager

The Board monitors investment performance at each meeting, including information about performance relative to the benchmark and competitors in the AIC’s UK Equity Income sector, receives updates in respect of professional sales and marketing activities carried out by the Manager for the Company twice annually and receives a formal recommendation from the Nominations Committee in respect of the continued appropriateness of the terms of the management agreement at least annually.

The assessment of the Manager by the Nominations Committee included consideration of the quality of the team involved in all aspects of servicing the Company, including company secretarial, administration, sales and marketing, the Manager’s use of gearing and management of the portfolio’s risk profile, the stability of the management group, its business priorities and the adequacy of succession planning.

Following completion of the review, the Board was satisfied with the performance of the Manager and the services being provided and believes that the continued appointment of the Manager on the terms agreed is in the interests of the Company’s shareholders as a whole.

Internal Control and Risk Management

The Board has overall responsibility for the Company’s system of internal control and for reviewing its effectiveness, as set out in the chart on the following page. The Audit Committee supports the Board in the continuous monitoring of the internal control and risk management framework. Details of the principal risks facing the Company, including emerging risks, and how these are mitigated are set out on pages 26 and 27.

The Board has established an ongoing process for identifying, evaluating and managing the principal risks faced by the Company. The process accords with the FRC’s guidance on Risk Management, Internal Control and Related Business and Financial Reporting published in September 2014. The system was in operation throughout the period and up to the date of this report. The system is designed to meet the specific risks faced by the Company and takes account of the nature of the Company’s reliance on its service providers and their internal controls. The system therefore manages rather than eliminates the risk of failure to achieve the Company’s business objectives and provides reasonable, but not absolute, assurance against material misstatement or loss.

The key components of the internal control framework include:

● clearly defined investment criteria which specify levels of authority and exposure limits. The Board reviews reports on compliance with the criteria at each meeting;

● regular reporting which allows the Board to assess the Company’s financial position. The management accounts and forecasts are reviewed by the Board at each meeting;

● the contractual agreements with the Manager and other third-party service providers. The Board reviews performance levels and adherence to relevant provisions of the agreements on a regular basis. The Nominations Committee, which consists of all Board members, conducts a formal evaluation of the overall level of service provided at least annually (see Nominations Committee Report on pages 49 and 50);

● the review of controls (including financial, operational and compliance) at the Manager and other third-party service providers. The Board receives quarterly reporting from the Manager and Depositary, and reviews annual assurance reports on the effectiveness of the control environments at the Company’s key service providers; and

● the review of additional reporting provided by:

– the Manager’s Risk team on the control environment in operation at the Manager and their view of the control environments in place at the third-party service providers used by the Company; and

– the Manager’s Internal Audit team on areas of operation which are relevant to the Company.

The Board has carried out a review of the effectiveness of the Company’s system of internal controls for the year ended 30 June 2022. During the course of its review the Board did not identify and was not advised of any failings or weaknesses relating to the Company’s portfolio that have been determined as material.

Internal Audit Function

Systems are in operation to safeguard the Company’s assets and shareholders’ investments, to maintain proper accounting records and to ensure that financial information used within the business, or published, is reliable.

The Company is an investment company, has no employees and delegates all executive activities to third-party service providers, principally among them, the Manager. The Board places reliance on the Company’s framework of internal control and the Audit Committee’s view on reporting received from specific second and third line of defence teams at the Manager.

The Manager’s Risk team supports the Audit Committee in considering the independently audited reports on the effectiveness of internal controls in place at the Company’s third-party service providers. The Manager’s Internal Audit department provides regular reporting to the Board on the operations at the Manager and presents at least annually to the Audit Committee. The Board considers this annually and continues to conclude that it is not necessary at the present time for the Company to have its own internal audit function.

Communication with Shareholders

Please see page 23 for information about how the Company communicates with shareholders.

System of Internal Controls

PricewaterhouseCoopers LLP have been appointed as the Company’s Auditors.

Audit Committee Report

I am pleased to present the Audit Committee Report for the year ended 30 June 2022.

Membership

The members of the Audit Committee (“Committee”) during the year were Samantha Wren, Clare Wardle and Ted Holmes. Ominder Dhillon was appointed a member of the Committee on his appointment as a Director of the Company on 1 September 2021. The Committee is chaired by Samantha Wren, who is considered by the Board to have recent and relevant financial experience, and the Committee as a whole has competence relevant to the sector in which the Company operates and to the Company as an investment trust. Other Directors may attend meetings by invitation of the Chair.

Meetings

The Committee usually meets at least three times a year, to review the half-year results, the annual results and to review the Company’s internal controls. It met three times in the year under review. The Company’s Auditors, the Fund Manager and the Manager’s Financial Reporting Manager for Investment Trusts are invited to attend meetings of the Committee on a regular basis. Other representatives of the Manager and BNP Paribas Securities Services may also be invited to attend if deemed necessary by the Committee.

Role and Responsibilities

The primary responsibilities of the Audit Committee are to ensure the integrity of the Company’s financial reporting, including oversight of the preparation and audit of the annual financial statements; to monitor and review the effectiveness of the systems of internal control and risk management in place at the Manager and the Company’s other third-party service providers; and to monitor the effectiveness and objectivity of the external Auditors and make recommendations to the Board regarding their appointment, re-appointment or removal.

The Audit Committee reports to the Board after each meeting and its responsibilities are set out in formal terms of reference which are reviewed at least annually.

In the year under review, the Committee considered the following matters:

Annual and half-year reports

● The appropriateness of the Company’s accounting policies and of the quality and effectiveness of the accounting records and management information maintained on behalf of the Company.

● The disclosures made in the reports in relation to internal controls and risk management, viability, going concern and related parties and consideration of whether the report is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy in order to make recommendations to the Board.

Independent Auditors

● The nature, scope and cost of the external audit and reviewing the Auditors’ findings in this respect.

● The appointment and evaluation of the independence, effectiveness and objectivity of the Auditors.

Internal controls and management of risk

● The principal risks facing the Company, including consideration of emerging risks, the risk management systems in place and the Company’s risk map.

● Reports on the effectiveness of the internal controls in place at Janus Henderson and the Company’s other principal third-party service providers.

● Compliance with the terms of the loan notes in issue.

● The need for the Company to have its own internal audit function.

● The whistleblowing arrangements in place at the Manager and other key service providers for their staff to raise concerns, in confidence, about possible improprieties, including in relation to the Company.

● The Manager’s policies in relation to information security and business continuity, meeting with representatives

of Janus Henderson’s internal audit and risk departments periodically.

● The Company’s anti-bribery policy, approach to tax evasion and the confirmations received from third-party service providers as to whether they have appropriate procedures in place in these respects.

● The annual confirmation from the Company’s Depositary in respect of the safe-keeping of the Company’s assets.

Appointment and Tenure of the Auditors

Regulations currently in force require the Company to rotate audit firms after a period of ten years, which may be extended where audit tenders are carried out or where more than one audit firm is appointed to carry out the audit. The Committee last carried out an audit tender process during the year ended 30 June 2014 and invited the incumbent auditor at the time, PricewaterhouseCoopers LLP (“PwC”), to participate. The tender was conducted on an integrated basis with the Manager and, following consideration of the tenders received, the Board recommended the reappointment of PwC to shareholders at the 2014 Annual General Meeting, in respect of the year ending 30 June 2015.

PwC were initially appointed as Auditors in 2009 and this is the fourth year the current audit partner, Allan McGrath, has been in place. Subject to the audit remaining effective and the continuing agreement from shareholders on the appointment of the Auditors, the Committee envisages carrying out an audit tender process in 2023 to ensure a new auditor is in place for the year ending 30 June 2024. The proposed tender period is considered to be in the best interests of shareholders and the Company as PwC have a detailed knowledge of our business, an understanding of the industry in which we operate and continue to demonstrate that they have the necessary expertise and capability to undertake the audit.

The Committee confirms that the Company is in compliance with the requirements of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014. This order relates to the frequency and governance of tenders for the appointment of the external auditors and the setting of the policy on the provision of non-audit services.

Auditors’ Independence

The Committee monitors the Auditors’ independence through three aspects of its work: the approval of a policy regulating the non-audit services that may be provided by the Auditors to the Company; assessing the appropriateness of the fees paid to the Auditors for all work undertaken by them; and by reviewing the information and assurances provided by the Auditors on their compliance with the relevant ethical standards. The Auditors provided no non-audit services during the year.

PwC confirmed that all of its partners and staff involved with the audit were independent of any links to the Company, and that these individuals had complied with their ethics and independence policies and procedures, which are fully consistent with the FRC’s Ethical Standards. Having considered the above-mentioned aspects, the performance and behaviour of the Auditors during the audit process and the assurances received from PwC, the Committee is satisfied that auditor independence and objectivity are safeguarded.

Audit Fees

The fees payable to the Auditors for audit services were

£46,000 (2021: £44,000) (inclusive of VAT).

Policy on Non-Audit Services

The Committee has approved, and keeps under regular review, the policy on the provision of non-audit services by the auditors. The policy sets out that the Company’s auditors will not be considered for non-audit work where this is prohibited by the current regulations and where it appears to affect their independence and objectivity. In addition, the provision of any non-audit services by the auditors is not permitted to exceed 70% of the average annual statutory audit fee for the three consecutive financial periods preceding the financial period to which the cap applies. Such services require approval in advance by the Audit Committee, or Audit Committee Chair, following due consideration of the proposed services.

Since the appointment of PwC in 2009, the Company has only engaged them on one occasion, in 2010, to undertake non-audit services, and no such services were provided in the year under review.

Audit for the Year ended 30 June 2022

In the year under review, PwC challenged both the Manager’s and the Board’s judgements and exercised professional scepticism. The audit team required detailed evidence of all metrics, numbers and disclosures made within the Annual Report to support a robust assessment and evaluation of the financial information contained therein. As an example, the Manager provides the Committee and the Auditors with an analysis of special dividends and the rationale for whether these should be treated as income or capital. The Auditors’ review will include challenge to the Manager to provide additional justification or background to the dividends before confirming whether they concur with the proposed treatment.

As an investment trust investing in listed equities, management has limited areas of judgement. Areas where the Audit Committee would challenge the Manager include the determination of the fair market value of debt in order to confirm the appropriate basis for calculation and stress testing of the revenue forecast to support the dividend payment policy and the assumptions in the viability statement.

The Committee did not consider it necessary to request the Auditors to look at any specific areas in relation to the audit for the year ended 30 June 2022.

The Committee is satisfied that the Annual Report for the year ended 30 June 2022, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.

In relation to the Annual Report for the year ended 30 June 2022, the following significant issues were considered by the Committee:

Significant issue

How the issue was addressed

Valuation and ownership of the Company’s investments

The Directors have appointed the Manager, who outsources some of the administration and accounting services to BNP Paribas Securities Services, to perform the valuation of the assets of the Company in accordance with its responsibilities under the AIFMD rules. As required under the AIFMD rules, the Manager has adopted a written valuation policy, which may be modified from time to time. Actively traded investments are valued using stock exchange prices provided by third-party pricing vendors.

Ownership of listed investments is verified by reconciliation to the Custodian’s records and the Directors have received quarterly reports from the Depositary, which has responsibility for overseeing the Company’s operations, including verification of ownership and valuation.


Significant issue	How the issue was addressed
Recognition of income	Income received, including special dividends, is accounted for in line with the Company’s accounting policy (as set out on page 68). Special dividends, and their treatment as revenue or capital, have been reviewed by the Committee and the rationale agreed. The Board reviews revenue forecasts at each Board meeting in support of the Company’s future dividends.
Maintaining internal controls	Information about the internal control and risk management framework adopted by the Company is set out in the Corporate Governance Statement on pages 44 and 45. The Committee receives regular reports on internal controls from Janus Henderson, BNP Paribas Securities Services, HSBC Bank plc and Computershare Investor Services plc and has access to the relevant personnel of Janus Henderson who have a responsibility for risk management and internal audit. The assurance report for one of the Company’s service providers was qualified by the respective service auditor. The Committee reviewed the instances giving rise to the qualification and received confirmation that appropriate action to address the issues identified in the report was being taken and that the exceptions identified had no impact on the Company. The Committee also meets annually with representatives from Janus Henderson and HSBC Bank plc to discuss and challenge their reports.
Maintenance of investment trust status	The Committee has considered regularly the controls in place to ensure that the regulations for ensuring investment trust status are observed at all times, receiving supporting documentation from Janus Henderson and BNP Paribas Securities Services.

Effectiveness of the External Audit

The Committee’s process for evaluating the effectiveness of the external audit comprises two components: consideration is given to the findings of the FRC’s Audit Quality Inspection Report and a post-audit assessment is carried out led by the Committee Chair.

The Auditors present and discuss the findings of the latest Audit Quality Inspection Report to the Committee and report on the progress made by the firm in addressing the areas identified for improvement in the prior year’s report.

The Auditor attended two Audit Committee meetings in the year, when the Committee was considering the half year and the annual results. The Committee Chair also met with the Auditor to review the audit results prior to these being presented to the Audit Committee.

In assessing the effectiveness of the audit process, the Committee Chair invites views from the Directors, the Fund Manager and other members of the Manager’s staff in assessing the robustness of the audit, level of challenge offered by the audit team, the quality of the audit team and timeliness of delivering the tasks required for the audit and reporting to the Committee. The Committee also met privately with the Audit Partner to discuss how the audit operated from his perspective.

Overall, the Committee considers that the audit quality for the year ended 30 June 2022 has been high and that the Manager and PwC have worked together to enhance and improve reporting to shareholders.

Following completion of the assessment, the Committee remained satisfied with the effectiveness of the audit provided by PwC and therefore recommended to the Board their continuing appointment. The Auditors have indicated their willingness to continue in office. Accordingly, resolutions reappointing PwC as auditors to the Company and authorising the Committee to determine their remuneration will be proposed at the Annual General Meeting.

Samantha Wren

Chair of the Audit Committee

16 September 2022

Nominations Committee Report

Membership

All Directors are members of the Committee. The Chairman of the Board is the Chairman of the Committee but would not chair meetings when the Committee is considering appointments for his successor.

Meetings

The Committee met twice during the year and once following the year end.

Role and Responsibilities

The Committee advises the Board on the composition of the Board and its Committees, in making appointments to the Board and ensuring suitable succession plans are in place for the Directors and the Fund Manager. It also reviews and monitors the engagement and performance of the Manager and other third-party service providers.

Its principal responsibilities include: reviewing the structure, size and composition of the Board and its Committees and leading the search for suitable candidates to fill roles as required, taking into consideration the balance of skills, knowledge, experience and diversity on the Board; ensuring annual performance evaluations are carried out, discussing the outcomes from those evaluations and making recommendations to the Board; considering the proposed election and re-election of Directors ahead of each annual general meeting; and evaluating the overall performance and terms of engagement of the Manager and other third-party service providers.

Succession Planning and Recruitment

When considering succession planning, the Committee bears in mind the balance of skills, knowledge, experience and diversity existing on the Board. Once a decision is made to recruit an additional Director, a formal job description is drawn up. The Committee will engage external recruitment agencies to facilitate the search. The Committee will assess candidates against objective criteria and with due regard for the benefits of diversity on the Board (including gender, social and ethnic backgrounds, as well as cognitive and personal strengths), taking care that any candidates recommended for appointment will be able to allocate sufficient time to the Company to discharge their responsibilities fully and effectively.

New appointments to the Board are made on a staggered basis in line with the tenure policy, ensuring ongoing refreshment combined with the importance of maintaining continuity and corporate knowledge. As part of the evaluation process, the Committee reviewed the tenure of the Board. The Directors have been on the Board for between 1 and 7 years. In the normal course of events, Mrs Wren, the Audit Committee Chair, will be due to retire at the 2024 Annual General Meeting. The Committee currently intends to commence steps to recruit a successor to Mrs Wren during the latter half of 2023, to ensure the new Director is provided with sufficient time for a full handover.

The Committee also reviews and recommends to the Board the Directors seeking re-election. Recommendation is not automatic and will follow a process of evaluation of each Director’s performance and consideration of the Director’s independence. The Committee also takes into account the mix of skills and experience of the current Board members.

Directors’ Performance Evaluation

Each year, the Committee assesses the composition of the Board and its performance, including that of individual Directors. Every three years an external review is conducted, and this year the evaluation was carried out by Stephenson Executive Services (“Stephenson”). The appraisal of the Chairman was led by Clare Wardle as the Senior Independent Director, assisted by Stephenson. Stephenson has no connection with the Company or any of the Directors.

The evaluation was conducted by way of in-depth interviews individually with each Director and also with the Fund Manager. The areas considered included Board composition and dynamics, management of meetings and support from the Manager in this respect, the appropriateness of the investment strategy and performance, the quality of the Board’s understanding of shareholders’ views and the Manager’s sales and marketing activities, succession planning and priorities for change. A review of the performance and effectiveness of the Board Committees was included as part of the evaluation process. The Committee has also reviewed the independence of each Director and their time commitment.

The conclusion of the external evaluator was that the Board works in a harmonious, effective and collegiate manner under a well-respected and hard-working Chairman, and that the Directors have a wide range of relevant experience. No areas of material weakness or concern were identified.

Following completion of the review, the Committee concluded that the Board remained highly effective, with a very good range of skills represented on the Board and a clear understanding of the risks facing the Company and that the Board Committees were operating effectively. Mrs Wardle also reported that the Chairman provided effective leadership. The Committee accordingly recommended to the Board that it should support the re-election of each of the Directors at the 2022 Annual General Meeting.

Diversity

All Board appointments are subject to a formal, rigorous and transparent procedure. The Company seeks to ensure that any Board vacancies are filled by the most qualified candidates based on objective criteria and merit and in the context of the skills, knowledge and experience that are needed for the Board to be effective.

The Board acknowledges and welcomes the recommendations from the FTSE Women Leaders Review on gender diversity on boards and the Parker Review about ethnic representation on boards. Whilst the Board does not feel that it would be appropriate to use specific diversity targets, given its small size, the Directors acknowledge that diversity is important to ensure that the Company can draw on a broad range of backgrounds, skills, knowledge, experience and perspectives to achieve effective stewardship of the Company. An integral part of the appointment process includes the consideration of diversity generally, taking into account gender, social and ethnic backgrounds, cognitive and personal strengths and experience. The Nominations Committee ensures that long lists of potential non-executive Directors include diverse candidates of appropriate experience and merit.

In all the Nominations Committee’s activities, there will be no discrimination on the grounds of gender, race, ethnicity, religion, sexual orientation, age or physical ability.

The Listing Rules of the FCA now require companies to report on whether they have met the following targets on board diversity: that at least 40% of the individuals on the board are women and at least one of the senior positions on the board is held by a woman. As at 30 June 2022, the Company had met these requirements. Two out of the five Directors (40%) are women and the two women Directors both have senior positions, one being the Senior Independent Director and the other the Audit Committee Chair. There have been no changes to the Board or the roles of Directors since 30 June 2022.

The following tables set out the gender and ethnic diversity of the Board:


Gender diversity	Number of Board members	Percentage of the Board	Number of senior positions on the Board1
Men	3	60	1
Women	2	40	2
Ethnic diversity
White British or other White (including minority-white groups)	4	80	3
Asian/Asian British	1	20	–

1 Senior positions include Chairman, Senior Independent Director and Audit Committee Chair

As an investment trust company with solely independent, non-executive Directors, the Company does not have a Chief Executive or a Chief Financial Officer and has no employees. Accordingly, there are no disclosures about executive management positions to be included. The role of Audit Committee Chair is considered to be a senior position and has been included in the above tables. The information in the tables was provided by individual Directors in response to a request from the Company.

Performance of Third-Party Service Providers

Each year, the Committee carries out an evaluation of the Manager and the Company’s key third-party service providers and their respective terms of engagement.

The Committee’s evaluation of the Manager includes assessing whether the contractual arrangements and remuneration structure in place remain appropriate and competitive and in the interests of shareholders as a whole. The Committee also considers the arrangements in place at Janus Henderson in terms of a short-term incapacity of the Fund Manager and succession planning for the Fund Manager over the longer term. The evaluation includes consideration of the quality of the team involved in all aspects of servicing the Company and a review of the stability of the management group and its business priorities.

Following its review, the Committee concluded that it was in the interests of shareholders as a whole to recommend to the Board that the appointment of the Manager should continue on the existing terms. The Committee also recommended the continuation of the appointment of the other key third-party service providers.

Sir Laurie Magnus CBE

Nominations Committee Chairman

16 September 2022

Directors’ Remuneration Report

Remuneration Policy

The Remuneration Policy (“the Policy”) sets out the principles applied in the remuneration of the Company’s Directors. The Policy was last approved by shareholders at the annual general meeting on 27 October 2020, and will continue in force until the annual general meeting in 2023.

The Board has not established a separate remuneration committee and matters relating to Directors’ remuneration are dealt with by the Board as a whole. Individual Directors do not participate in discussions relating to their own remuneration. The appropriateness and relevance of the Policy is reviewed at least annually, particularly in terms of whether the policy supports the Company’s long-term sustainable success. In determining the Policy, the Board takes into account all factors which it deems necessary, including relevant legal and regulatory requirements, the provisions and recommendations of the UK Code and the AIC Code and fees paid to directors of comparable investment trusts.

The objective of the Policy is to attract, retain and motivate non-executive Directors of the quality required to manage the Company successfully. The Company’s approach is that fees payable to the non-executive Directors should reflect the time spent on the Company’s affairs, reflect the responsibilities borne by the Directors, and be sufficient to promote the long-term success of the Company.

Directors are remunerated in the form of fees payable to the Director personally quarterly in arrears. Fees are pro-rated where a change takes place during a financial year. The total annual aggregate fees payable to Directors shall not exceed £350,000.

The Chairman of the Board is paid a higher fee in recognition of his additional responsibilities, as is the Senior Independent Director and Chair of the Audit Committee. The Directors may be reimbursed for all reasonable and properly documented expenses incurred in the performance of their duties. The level of fees paid to each Director is reviewed annually, although such a review may not necessarily result in any change to the rates. The level of fees paid to the directors of other investment companies of a similar size and nature is taken into account when carrying out the review in order to avoid and manage conflicts of interest in determining remuneration levels. The Board may amend the level of remuneration paid to individual Directors within the parameters of the Policy.

No Director is eligible to receive bonuses, pension benefits, share options or other benefits and no long-term incentive schemes are in place.

The Policy, irrespective of any changes, is put to shareholders at intervals of not more than three years with the next approval due to be sought at the annual general meeting in 2023.

Letters of appointment

All Directors are non-executive and are appointed under a Letter of Appointment. No Director has a service contract with the Company. There are no set notice periods and a Director may resign by notice in writing to the Board at any time. No compensation is payable for loss of office.

Recruitment principles

All Directors, including any new appointments to the Board, are paid at the same rate. The Chairman of the Board, Senior Independent Director and Chair of the Audit Committee are paid higher fees in recognition of their additional responsibilities.

The Board will not pay any introductory fee or incentive to any person to encourage them to become a Director, but may pay the fees of search and selection specialists in connection with the appointment of any new non-executive Director.

The Company intends to appoint only non-executive Directors for the foreseeable future.

Views of shareholders

Any views expressed by shareholders on the fees being paid to Directors would be taken into consideration by the Board when reviewing levels of remuneration.

Annual Report on Remuneration

This report is submitted in accordance with Schedule 8 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 as amended (the “Regulations”). The report also meets the relevant requirements of the Companies Act 2006 (the “Act”) and the Listing Rules of the FCA and describes how the Board has applied the principles relating to Directors’ remuneration.

As required by the Act, an ordinary resolution to approve the Directors’ Remuneration Report will be proposed at the forthcoming Annual General Meeting.

The Company’s Auditors are required to report on certain information contained within this report; where information set out below has been audited, it is indicated as such.

All Directors are non-executive and the Company has no chief executive officer or employees; as such some of the reporting requirements contained in the Regulations are not applicable and have not been reported on, including the requirement for a future policy table and an illustrative representation of the level of remuneration that could be received by each individual Director. It is believed that all relevant information is disclosed within this report in an appropriate format.

The Board has not been provided with advice or services by any person in respect of its consideration of the Directors’ remuneration.

Statement from the Chairman

As the Company has no employees and the Board comprises entirely non-executive Directors, the Board has not established a separate Remuneration Committee. Directors’ remuneration is reviewed annually and is determined by the Board as a whole within the parameters approved by shareholders.

The Board reviewed the fees paid by other investment companies in the AIC UK Equity Income Sector (the Company’s peer group), fees paid to directors of other large investment trusts with assets of over £1bn (excluding sector specialists) and those paid by the Janus Henderson managed investment trusts. The Board also took into consideration the prevailing rate of CPI, as well as the increasing responsibilities and time commitment required of Directors. Following consideration, the Directors’ fees were increased with effect from 1 January 2022 by 3.8% (rounded to the nearest £100), in line with inflation. The new rates are as set out in the table below. The increases were to ensure that the Directors are properly remunerated for their services to the Company and so that the Company can remain competitive when seeking new Directors. There have been no other major decisions on Directors’ remuneration or any other changes to the remuneration paid to each individual Director in the year under review.

The Board is satisfied that the changes to the remuneration of the Directors are compliant with the Directors’ Remuneration Policy approved by shareholders at the 2020 annual general meeting. There will be no significant change in the way that the Remuneration Policy will be implemented in the course of the next financial year.

Directors’ annual fees

The current fees for specific responsibilities are set out in the table below. Other than the Chair of the Audit Committee, no fees are payable for membership of the Board’s Committees.


Role	Rate at 30 June 2022 £	Rate at 30 June 2021 £
Chairman of the Board	50,100	48,300
Chair of the Audit Committee	37,600	36,200
Senior Independent Director	34,500	33,200
Other non-executive Directors	31,300	30,200

Performance

The chart below illustrates the total shareholder return for a holding in the Company’s shares over the ten-year period to 30 June 2022 as compared with the FTSE All-Share Index, which was adopted as the Company’s benchmark index with effect from 1 July 2019.

Total return performance over the ten-year period to 30 June 2022

Directors’ remuneration (audited)

The remuneration paid to the Directors who served during the year ended 30 June 2022 and 30 June 2021 was as follows:


	Year ended 30 June 2022 Total salary and fees £	Year ended 30 June 2021 Total salary and fees £	Year ended 30 June 2022 Total expenses and taxable benefits £	Year ended 30 June 2021 Total expenses and taxable benefits £	Year ended 30 June 2022 Total £	Year ended 30 June 2021 Total £
Ted Holmes	30,750	30,000	–	–	30,750	30,000
Sir Laurie Magnus1	49,200	42,315	–	–	49,200	42,315
Martin Morgan2	10,826	32,421	239	–	11,065	32,421
Ominder Dhillon3	25,662	–	256	–	25,918	–
Lord Remnant4	–	15,425	–	–	–	15,425
Clare Wardle5	32,880	30,000	–	–	32,880	30,000
Samantha Wren6	36,900	35,950	–	–	36,900	35,950
Total	186,218	186,111	495	–	186,713	186,111

Notes:

The amounts paid by the Company to the Directors were for services as non-executive Directors. The table above omits other columns set out in the relevant regulations because no payments of other types such as performance-related pay and pension related payments were made. No variable pay was paid to any Director

1 Appointed Chairman on 27 October 2020; Chairman and highest paid Director

2 Ceased to be a Director on 28 October 2021

3 Appointed a Director on 1 September 2021

4 Ceased to be Chairman and a Director on 27 October 2020

5 Appointed as Senior Independent Director on 28 October 2021

6 Chair of the Audit Committee

No other remuneration or compensation was paid or payable by the Company during the year to any of the current or former Directors or third parties.

Annual change in Directors’ remuneration

The table below sets out the annual percentage change in Directors’ fees for the Directors for the last three years in respect of each Director that has served for a minimum of two financial years.


Director	Year to 30 June 2022 %	Year to 30 June 2021 %	Year to 30 June 2020 %
Ted Holmes	2.5	1.9	2.6
Sir Laurie Magnus	16.31	n/a	n/a
Ominder Dhillon2	n/a	n/a	n/a
Clare Wardle	9.63	n/a	n/a
Samantha Wren	2.6	2.0	2.7

1 Sir Laurie Magnus was appointed Chairman on 27 October 2020. The % increase reflects his change of role during the course of the year to 30 June 2021 and the additional fee that is associated with this position

2 Appointed a Director on 1 September 2021

3 Clare Wardle was appointed as Senior Independent Director on 28 October 2021. The % increase reflects her change of role during the course of the year to 30 June 2022 and the additional fee that is associated with this position

Directors’ interests in shares (audited)


Ordinary shares of 25p
Beneficial interest	30 June 2022 (or date of retirement, if earlier)	1 July 2021 (or date of retirement, if earlier/date of appointment if later)
Ominder Dhillon1	3,000	–
Ted Holmes	5,000	5,000
Sir Laurie Magnus	110,000	80,000
Martin Morgan2	23,900	23,900
Lord Remnant3	n/a	73,210
Clare Wardle	16,447	16,447
Samantha Wren	9,597	9,265

1 Appointed a Director on 1 September 2021

2 Ceased to be a Director on 28 October 2021

3 Ceased to be a Director on 27 October 2020

The interests of the Directors and their connected persons in the ordinary shares of the Company at the beginning and end of the financial year are shown in the preceding table. There have been no changes to any of the Directors’ interests in the period from 1 July 2022 to the date of this report. No Director has any interests in the preference or preferred stock of the Company.

The Company does not have a shareholding requirement for Directors.

Relative importance of spend on pay

In order to show the relative importance of spend on pay, the table below sets out the total level of remuneration compared with the distributions to shareholders by way of dividends. There were no other significant distributions, payments or other uses of the Company’s net return or cash flow deemed to assist in the understanding of the relative importance of spend on pay.


	2022 £	2021 £	Change £	Change %
Total Directors’ remuneration	186,713	186,111	602	0.3
Ordinary dividends paid	86,985,924	80,926,350	6,059,574	7.5

Statement of voting at Annual General Meeting

At the Company’s last AGM held on 28 October 2021, shareholders approved the Directors’ Remuneration Report in respect of the year ended 30 June 2021. Shareholders approved the Directors’ Remuneration Policy at the AGM on 27 October 2020. The following votes were received on the resolutions:


Resolution	For (including discretionary)	% of total votes1	Against	% of total votes1	Withheld
Remuneration Policy (poll votes at the 2020 AGM)	6,313,349	99.2	48,506	0.8	58,263
Remuneration Report (proxy votes at the 2021 AGM)	6,084,862	99.2	49,322	0.8	52,524

1 Excluding votes withheld

Approval of the Annual Report on Remuneration

The Annual Report on Remuneration was approved by the Board on 16 September 2022.

On behalf of the Board

Sir Laurie Magnus CBE

Chairman

16 September 2022

Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and the Republic of Ireland”, and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the net return or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

● select suitable accounting policies and then apply them consistently;

● make judgements and accounting estimates that are reasonable and prudent;

● state whether applicable UK Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements; and

● prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report and Statement of Corporate Governance that comply with that law and those regulations.

The Directors consider that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.

Directors’ Responsibility Statement

Each of the Directors, who are listed on pages 34 and 35, confirms that, to the best of his or her knowledge:

● the Company’s financial statements, which have been prepared in accordance with UK Accounting Standards on a going concern basis, give a true and fair view of the assets, liabilities, financial position and return of the Company; and

● the Strategic Report and financial statements include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

On behalf of the Board

Sir Laurie Magnus CBE

Chairman

16 September 2022

The financial statements are published on the website www.cityinvestmenttrust.com.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The maintenance and integrity of the website is the responsibility of Janus Henderson; the work carried out by the Auditors does not involve consideration of these matters and, accordingly, the Auditors accept no responsibility for any changes that may have occurred to the Annual Report since it was initially presented on the website.

Financial Statements

Independent Auditors’ Report to the Members of The City of London Investment Trust plc

Report on the audit of the financial statements

Opinion

In our opinion, The City of London Investment Trust plc’s financial statements:

● give a true and fair view of the state of the Company’s affairs as at 30 June 2022 and of its net return for the year then ended;

● have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law); and

● have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual Report, which comprise: the Statement of Financial Position as at 30 June 2022; the Income Statement; the Statement of Changes in Equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.

Our opinion is consistent with our reporting to the Audit Committee.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remained independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.

We have provided no non-audit services to the Company in the period under audit.

Our audit approach

Context

● The Company is a standalone Investment Trust Company and engages Janus Henderson Fund Management UK Limited (the “Manager”) to manage its assets.

● We conducted our audit of the financial statements using information from BNP Paribas Securities Services (the “Administrator”) to whom the Manager has, with the consent of the Directors, delegated the provision of certain administrative functions.

● We tailored the scope of our audit taking into account the types of investments within the Company, the involvement of the third parties referred to above, the accounting processes and controls, and the industry in which the Company operates.

● We obtained an understanding of the internal controls in place at both the Manager and the Administrator, identified and tested those controls on which we wished to place reliance and then performed substantive testing using reports obtained from the Administrator.

Overview


Audit scope	● As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. ● In planning our audit, we made enquiries of the Directors and Manager to understand the extent of the potential impact of climate change risk on the Company’s financial statements. ● In conducting our audit, we made enquiries of the Directors and Manager to understand the extent of the potential impact of the climate change risk on the Company’s financial statements. Both concluded that the impact on the measurement and disclosures within the financial statements is not material because the Company’s investment portfolio is made up of Level 1 quoted securities which are valued at fair value based on market prices. We found this to be consistent with our understanding of the Company’s investment activities. ● We also considered the consistency of the climate change disclosures included in the Strategic Report with the financial statements and our knowledge from our audit.
Key audit matters	● Valuation and existence of investments. ● Accuracy, occurrence and completeness of income from investments.
Materiality	● Overall materiality: £17,966,572 (2021: £17,273,252) based on 1% of net asset value. ● Performance materiality: £13,474,929 (2021: £12,954,939).

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.

Key audit matters

Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

This is not a complete list of all risks identified by our audit.

Consideration of the impact of Covid-19, which was a key audit matter last year, is no longer included because of reduced uncertainty of the impact of Covid-19 in the current year as markets and economies continue to recover. Otherwise, the key audit matters below are consistent with last year.


Key audit matter	How our audit addressed the key audit matter
Valuation and existence of investments Refer to page 47 (Audit Committee Report), page 67 (Accounting Policies) and page 74 (Notes to the Financial Statements). The investment portfolio at the year end comprised listed equity investments and fixed interest investments valued at £1,923 million. We focused on the valuation and existence of investments because investments represent the principal element of the net asset value as disclosed on the Statement of Financial Position in the financial statements.	We tested the valuation of the listed equity investments by agreeing the prices used in the valuation to independent third-party sources. No material misstatements were identified. We tested the existence of the investment portfolio by agreeing investment holdings to an independent custodian confirmation. No material misstatements were identified. We assessed the accounting policy for investments held at fair value through profit or loss for compliance with accounting standards and performed testing to check that investments are accounted for in accordance with the stated accounting policy. We did not identify any material matters to report.

Key audit matter

How our audit addressed the key audit matter

Valuation and existence of investments Refer to page 47 (Audit Committee Report), page 67 (Accounting Policies) and page 74 (Notes to the Financial Statements). The investment portfolio at the year end comprised listed equity investments and fixed interest investments valued at

£1,923 million. We focused on the valuation and existence of investments because investments represent the principal element of the net asset value as disclosed on the Statement of Financial

Position in the financial statements.

We tested the valuation of the listed equity investments by agreeing the prices used in the valuation to independent third-party sources. No material misstatements were identified. We tested the existence of the investment portfolio by agreeing investment holdings to an independent custodian confirmation. No material misstatements were identified. We assessed the accounting policy for investments held

at fair value through profit or loss for compliance with accounting standards and performed testing to check that investments are accounted for in accordance with the stated accounting policy.

We did not identify any material matters to report.


Key audit matter	How our audit addressed the key audit matter
Accuracy, occurrence and completeness of income from investments Refer to page 48 (Audit Committee Report), page 68 (Accounting Policies) and page 70 (Notes to the Financial Statements). Income from investments comprised dividend income. We focused on the accuracy, completeness and occurrence of investment income recognition as incomplete or inaccurate income could have a material impact on the Company’s net asset value and dividend cover. We also focused on the accounting policy for investment income recognition and the presentation of investment income in the Income Statement for compliance with the requirements of The Association of Investment Companies Statement of Recommended Practice (the “AIC SORP”), as incorrect application could indicate a misstatement in income recognition.	We assessed the accounting policy for investment income recognition for compliance with accounting standards and the AIC SORP and performed testing to check that income from investments had been accounted for in accordance with this stated accounting policy. We found that the accounting policies implemented were in accordance with accounting standards and the AIC SORP, and that income from investments has been accounted for in accordance with the stated accounting policy. We tested accuracy of dividend receipts by agreeing the dividend rates from investments to independent market data. To test for completeness, we tested, for all investment holdings in the portfolio, that all dividends declared in the market for investment holdings had been recorded. We also tested the allocation and presentation of dividend income between the revenue and capital return columns of the Income Statement in line with the requirements set out in the AIC SORP by determining reasons behind dividend distributions. Our procedures did not identify any misstatements.

Key audit matter

How our audit addressed the key audit matter

Accuracy, occurrence and completeness of income from investments

Refer to page 48 (Audit Committee Report), page 68 (Accounting Policies) and page 70 (Notes to the Financial Statements). Income from investments comprised dividend income. We focused on the accuracy, completeness and occurrence of investment income recognition as incomplete or inaccurate income could have a material impact on the Company’s net asset value and dividend cover. We also focused on the accounting policy for investment income recognition and the presentation of investment income in the Income Statement for compliance with the requirements of The Association of Investment Companies Statement of Recommended Practice (the “AIC SORP”), as incorrect application could indicate a misstatement in income recognition.

We assessed the accounting policy for investment income recognition for compliance with accounting standards and the AIC SORP and performed testing to check that income from investments had been accounted for in accordance with this stated accounting policy. We found that the accounting policies implemented were in accordance with accounting standards and the AIC SORP, and that income from investments has been accounted for in accordance with the stated accounting policy. We tested accuracy of dividend receipts by agreeing the dividend rates from investments to independent market data. To test for completeness, we tested, for all investment holdings in the portfolio, that all dividends declared in the market for investment holdings had been recorded. We also tested the allocation and presentation of dividend income between the revenue and capital return columns of the Income Statement in line with the requirements set out in the AIC SORP by determining reasons behind dividend distributions. Our procedures did not identify any misstatements.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Company, the accounting processes and controls, and the industry in which it operates.

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:


Overall Company materiality	£17,966,572 (2021: £17,273,252).
How we determined it	1% of net asset value.
Rationale for benchmark applied	We have applied this benchmark, which is a generally accepted auditing practice for investment trust audits.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2021: 75%) of overall materiality, amounting to £13,474,929 (2021: £12,954,939) for the Company financial statements.

In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £898,329 (2021: £863,663) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Conclusions relating to going concern

Our evaluation of the Directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included:

● evaluating the Directors’ updated risk assessment and considering whether it addressed relevant threats, including those presented by Covid-19 and the Russian government’s invasion of Ukraine;

● evaluating the Directors’ assessment of potential operational impacts, considering their consistency with other available information and our understanding of the business and assessed the potential impact on the financial statements;

● reviewing the Directors’ assessment of the Company’s financial position in the context of its ability to meet future expected operating expenses, their assessment of liquidity as well as their review of the operational resilience of the Company and oversight of key third-party service providers; and

● assessing the implications of significant reductions in net asset value as a result of market performance on the ongoing ability of the Company to operate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Company’s ability to continue as a going concern.

In relation to the Directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Reporting on other information

The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.

With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included.

Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below.

Strategic Report and Directors’ Report

In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the year ended 30 June 2022 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.

In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report.

Directors’ Remuneration

In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Corporate governance statement

The Listing Rules require us to review the Directors’ statements in relation to going concern, longer-term viability and that part of the corporate governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other information section of this report.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement, included within the Strategic Report is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to:

● the Directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;

● the disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how these are being managed or mitigated;

● the Directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the Company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;

● the Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate; and

● the Directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Our review of the Directors’ statement regarding the longer-term viability of the Company was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors’ process supporting their statement; checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial statements and our knowledge and understanding of the Company and its environment obtained in the course of the audit.

In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of

the corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:

● the Directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable,

and provides the information necessary for the members to assess the Company’s position, performance, business model and strategy;

● the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and

● the section of the Annual Report describing the work of the Audit Committee.

We have nothing to report in respect of our responsibility to report when the Directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.

Responsibilities for the financial statements and the audit

Responsibilities of the Directors for the financial statements

As explained more fully in the Statement of Directors’ Responsibilities set out on page 55, the Directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

Based on our understanding of the Company and industry, we identified that the principal risks of non-compliance with laws and regulations related to the ongoing qualification as an Investment Trust under the Corporation Tax Act 2010, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls),

and determined that the principal risks were related to posting of inappropriate journal entries to increase income or to overstate the value of investments and increase the net asset value of the Company. Audit procedures performed by the engagement team included:

● discussions with the Directors, the Manager and the Administrator, including consideration of known or suspected instances of non-compliance with laws and regulation and fraud;

● evaluation of the controls implemented by the Manager and the Administrator designed to prevent and detect irregularities;

● assessment of the Company’s compliance with the requirements of Section 1158 of the Corporation Tax Act 2010, including recalculation of numerical aspects of the eligibility conditions;

● identifying and testing journal entries, in particular a sample of journals posted as part of the financial year end close process; and

● designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:

www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this report

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Other required reporting

Companies Act 2006 exception reporting

Under the Companies Act 2006 we are required to report to you if, in our opinion:

● we have not obtained all the information and explanations we require for our audit; or

● adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or

● certain disclosures of Directors’ remuneration specified by law are not made; or

● the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Appointment

Following the recommendation of the Audit Committee, we were appointed by the members in 2009 to audit the financial statements for the year ended 30 June 2009 and subsequent financial periods. The period of total uninterrupted engagement is 14 years, covering the years ended 30 June 2009 to 30 June 2022.

Allan McGrath (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

Edinburgh

16 September 2022

Income Statement


Notes		Year ended 30 June 2022			Year ended 30 June 2021
Revenue return £’000	Capital return £’000	Total return £’000	Revenue return £’000	Capital return £’000	Total return £’000
2	Gains on investments held at fair value through profit or loss	–	13,394	13,394	–	200,267	200,267
3	Income from investments held at fair value through profit or loss	98,028	–	98,028	77,626	–	77,626
4	Other interest receivable and similar income	190	–	190	263	–	263
	Gross revenue and capital gains	98,218	13,394	111,612	77,889	200,267	278,156
5	Management fee	(1,746)	(4,073)	(5,819)	(1,493)	(3,484)	(4,977)
6	Other administrative expenses	(774)	–	(774)	(726)	(7)	(733)
	Net return before finance costs and taxation	95,698	9,321	105,019	75,670	196,776	272,446
7	Finance costs	(1,474)	(3,075)	(4,549)	(1,696)	(3,589)	(5,285)
	Net return before taxation	94,224	6,246	100,470	73,974	193,187	267,161
8	Taxation	(1,236)	–	(1,236)	(1,165)	–	(1,165)
Net return after taxation		92,988	6,246	99,234	72,809	193,187	265,996
9	Return per ordinary share – basic and diluted	20.72p	1.39p	22.11p	17.09p	45.36p	62.45p

The total columns of this statement represent the Company’s Income Statement. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All revenue and capital items in the above statement derive from continuing operations. The Company has no recognised gains or losses other than those recognised in the Income Statement.

Statement of Changes in Equity


Notes	Year ended 30 June 2022	Called up share capital £’000	Share premium account £’000	Capital redemption reserve £’000	Other capital reserves £’000	Revenue reserve £’000	Total £’000
	At 1 July 2021	111,406	855,597	2,707	720,048	37,567	1,727,325
	Net return after taxation	–	–	–	6,246	92,988	99,234
17, 18	Issue of 14,015,000 new ordinary shares	3,504	53,546	–	–	–	57,050
10	Dividends paid	–	–	–	–	(86,952)	(86,952)
At 30 June 2022		114,910	909,143	2,707	726,294	43,603	1,796,657
Notes	Year ended 30 June 2021	Called up share capital £’000	Share premium account £’000	Capital redemption reserve £’000	Other capital reserves £’000	Revenue reserve £’000	Total £’000
	At 1 July 2020	104,101	752,967	2,707	526,861	45,623	1,432,259
	Net return after taxation	–	–	–	193,187	72,809	265,996
17, 18	Buyback of 1,175,000 ordinary shares for treasury
	–	–	–	(3,736)	–	(3,736)
17, 18	Issue of 1,175,000 ordinary shares from treasury
	–	124	–	3,736	–	3,860
17, 18	Issue of 29,220,000 new ordinary shares
	7,305	102,506	–	–	–	109,811
10	Dividends paid	–	–	–	–	(80,865)	(80,865)
	At 30 June 2021	111,406	855,597	2,707	720,048	37,567	1,727,325

The notes on pages 67 to 82 form part of these financial statements

Statement of Financial Position


Notes		30 June 2022 £’000	30 June 2021 £’000
	Fixed assets
11	Investments held at fair value through profit or loss
	Listed at market value in the United Kingdom	1,642,199	1,618,973
	Listed at market value overseas	281,071	227,701
12	Investment in subsidiary undertakings	347	347
		1,923,617	1,847,021
	Current assets	11,451	10,157
13	Debtors
		11,451	10,157
14	Creditors: amounts falling due within one year	(22,835)	(14,323)
Net current liabilities		(11,384)	(4,166)
Total assets less current liabilities		1,912,233	1,842,855
15	Creditors: amounts falling due after more than one year	(115,576)	(115,530)
Net assets		1,796,657	1,727,325
	Capital and reserves
17	Called up share capital	114,910	111,406
18	Share premium account	909,143	855,597
19	Capital redemption reserve	2,707	2,707
19	Other capital reserves	726,294	720,048
20	Revenue reserve	43,603	37,567
21	Total shareholders' funds	1,796,657	1,727,325
21	Net asset value per ordinary share – basic and diluted	390.88p	387.62p

The financial statements on pages 64 to 82 were approved by the Board of Directors on 16 September 2022 and signed on its behalf by:

Sir Laurie Magnus CBE Chairman

Registration number: 34871

Notes to the Financial Statements

1 Accounting policies

(a) Basis of accounting

The Company is a registered investment company as defined in Section 833 of the Companies Act 2006 and is incorporated in the UK. It operates in the UK and is registered at the address on page 92.

The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland, and with the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts (“the SORP”) issued in April 2021 by the Association of Investment Companies.

The principal accounting policies applied in the presentation of these financial statements are set out below. These policies have been consistently applied to all the years presented.

As an investment fund the Company has the option, which it has taken, not to present a cash flow statement. A cash flow statement is not required when an investment fund meets all the following conditions: substantially all of the entity’s investments are highly liquid, substantially all of the entity’s investments are carried at market value, and the entity provides a Statement of Changes in Equity. The Directors have assessed that the Company meets all of these conditions.

The financial statements have been prepared under the historical cost basis except for the measurement at fair value of investments. In applying FRS 102, financial instruments have been accounted for in accordance with Sections 11 and 12 of the standard. All of the Company’s operations are of a continuing nature.

The financial statements of the Company’s three subsidiaries have not been consolidated on the basis of immateriality and dormancy. Consequently, the financial statements present information about the Company as an individual entity. The Directors consider that the values of the subsidiary undertakings are not less than the amounts at which they are included in the financial statements.

The preparation of the Company’s financial statements on occasion requires the Directors to make judgements, estimates and assumptions that affect the reported amounts in the primary financial statements and the accompanying disclosures. These assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in the current and future periods, depending on circumstance.

The decision to allocate special dividends as income or capital is a judgement but not deemed to be material. The allocation of expenses to income or capital is a judgement as well, but also is not deemed to be material. The Directors do not believe that any accounting judgements or estimates have been applied to this set of financial statements that have a significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year.

(b) Going concern

The assets of the Company consist of securities that are readily realisable and, accordingly, the Directors believe that the Company has adequate resources to continue in operational existence for at least twelve months from the date of

approval of the financial statements. The Directors have also considered the aftermath of the Covid-19 pandemic and the risks arising from the wider ramifications of the conflict between Russia and Ukraine, including cash flow forecasting, a review of covenant compliance including the headroom above the most restrictive covenants and an assessment of the liquidity of the portfolio. They have concluded that the Company is able to meet its financial obligations, including the repayment of the bank overdraft, as they fall due for a period of at least twelve months from the date of approval of the financial statements. Having assessed these factors, the principal risks and other matters discussed in connection with the viability statement, the Board has determined that it is appropriate for the financial statements to be prepared on a going concern basis.

Listed investments are valued at fair value, which is deemed to be bid market prices or the last traded price depending on the convention of the exchange on which the investment is quoted.

The only unquoted investments are the Company’s subsidiaries which are valued at the net asset value according to their latest financial statements and this is considered to be fair value.

Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Income Statement as “Gains/(losses) on investments held at fair value through profit or loss”. Transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the Income Statement.

All purchases and sales are accounted for on a trade date basis.

1 Accounting policies (continued)

(d) Foreign currency

The results and financial position of the Company are expressed in pounds sterling, which is the functional currency and presentational currency of the Company. Sterling is the functional currency because it is the currency of the primary economic environment in which the Company operates.

Transactions recorded in overseas currencies during the year are translated into sterling at the appropriate daily exchange rates. Assets and liabilities denominated in overseas currencies at the Statement of Financial Position date are translated into sterling at the exchange rates ruling at that date.

Any gains or losses on the translation of foreign currency balances, whether realised or unrealised, are taken to the capital or to the revenue return of the Income Statement, depending on whether the gain or loss is of a capital or revenue nature.

(e) Income

Dividends receivable from equity shares are taken to the revenue return on an ex-dividend basis except where, in the opinion of Directors, the dividend is capital in nature, in which case it is taken to the capital return. Special dividends are recognised on an ex-dividend basis and treated as capital or revenue depending on the facts and circumstances of each dividend. Bank interest and stock lending revenue are accounted for on an accruals basis.

The ordinary element of scrip dividends received in lieu of cash dividends is recognised as revenue. Any enhancement above the cash dividend is treated as capital.

Where the Company enters into a commitment to underwrite an issue of securities in exchange for the receipt of commission, this creates a derivative financial instrument. Any such derivatives are recognised initially at fair value and are subsequently re-measured at fair value, with the related gains and losses being reflected in the Income Statement. Net losses arising from derivatives, where the actual or expected loss from taking up the securities underwritten exceeds the commission income, are allocated to the capital return. Net gains are allocated to the revenue return.

Fees earned from stock lending are accounted for on an accruals basis and shown in the revenue return based on amounts to which the Company is entitled. This is after deduction of amounts withheld by the counterparty arranging the stock lending facility. The stock lending accounting policy is set out in note 16.3.

The accounting for option premium income is dealt with on pages 69 and 70, under ‘Derivative financial instruments’.

(f) Management and other administrative expenses and finance costs

All expenses and finance costs are accounted for on an accruals basis. In accordance with the Board’s expectation, over the long term, that investment returns will be attributable 70% to capital and 30% to revenue, the Company charges to capital 70% of the finance costs (excluding dividends payable on the preference and preferred ordinary stocks) and management fees with the remaining 30% being charged to revenue. Other administrative expenses are charged 100% to revenue except where they relate directly to a capital transaction.

(g) Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using the effective tax rate of corporation tax for the accounting period.

The tax effect of different items of expenditure is allocated between the capital return and revenue return using the Company’s effective rate of tax for the year. In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Income Statement is the “marginal basis”. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Income Statement, then no tax relief is transferred to the capital return column.

Deferred taxation is provided on all timing differences that have originated but not reversed by the Statement of Financial Position date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of timing differences can be deducted. Any liability to deferred tax is provided at the average rate of tax expected to apply based on tax rates and laws that have been enacted or substantially enacted at the Statement of Financial Position date. Deferred tax assets and liabilities are not discounted to reflect the time value of money.

1 Accounting policies (continued)

(h) Borrowings

Overdrafts, debentures and secured notes are initially recorded at the value of the proceeds received, net of direct issue costs. They are subsequently measured at amortised cost. Finance costs, including interest payable, premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the Income Statement using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

(i) Preference stocks

Under Section 22.5 of FRS 102, preference and preferred ordinary stocks are classified as financial liabilities. The dividends associated with the preference and preferred ordinary stocks are charged fully to the Company’s revenue return within finance costs.

(j) Dividends payable to shareholders

Dividends payable to shareholders are recognised in the financial statements when they are paid, or in the case of final dividends, when they are approved by shareholders. Dividends are dealt with in the Statement of Changes in Equity.

(k) Issue and repurchase of ordinary shares and associated costs

The proceeds from the share issue of new ordinary shares (including those relating to the sale of shares out of treasury) and the aggregate cost of repurchasing ordinary shares (including those to be held in treasury) are taken directly to equity and dealt with in the Statement of Changes in Equity. Issue costs incurred in respect of shares sold out of treasury are offset against proceeds received and dealt with in other capital reserves. Share issues and repurchase transactions are accounted for on a trade date basis.

(l) Capital and reserves

Called up share capital represents the nominal value of ordinary shares issued.

The share premium account represents the premium above nominal value received by the Company on issuing shares net of issue costs.

The revenue reserve represents accumulated revenue profits retained by the Company that have not currently been distributed to shareholders as a dividend.

The capital redemption reserve represents the nominal value of ordinary shares, preference stock and preferred ordinary stock that have been repurchased and cancelled.

Other capital reserves are split into two components, the capital reserve arising on investments sold and the capital reserve arising on revaluation of investments held. The following analyses what is accounted for in each of these components.

Capital reserve arising on investments sold

The following are accounted for in this reserve: gains and losses on disposals of investments; expenses and finance costs allocated to capital net of tax relief; realised foreign exchange differences of a capital nature; and cost of repurchasing ordinary share capital.

Capital reserve arising on revaluation of investments held

The following are accounted for in this reserve: increases and decreases in the valuation of investments held at the year end; and unrealised foreign exchange differences of a capital nature.

(m) Distributable reserves

The Company’s capital reserve arising on investments sold and revenue reserve may be distributed by way of a dividend. There may, however, be other factors that restrict the value of reserves that can be distributed. In the case of the Company, there are small priority amounts that are payable to preference and preferred stockholders, which amount to less than 1% of distributable reserves at 30 June 2022. In addition, unrealised fair value losses on investments held would be deducted from distributable reserves, but at 30 June 2022, the Company had unrealised fair value gains of £399,709,000.

(n) Derivative financial instruments

Derivative transactions which the Company may enter into comprise forward exchange contracts (the purpose of which is to hedge foreign currency exposure) and futures contracts on indices appropriate to sections of the portfolio (one purpose for which may be to provide protection against falls in the capital values of the holdings). The Company may also write options on shares represented in the portfolio where such options are priced attractively relative to Janus Henderson’s expectations for the relevant share prices and to generate additional return for shareholders. The Company does not use derivative financial instruments for speculative purposes.

1 Accounting policies (continued)

(n) Derivative financial instruments (continued)

The use of financial derivatives is governed by the Company’s policies as approved by the Board.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the Income Statement as they arise. If capital in nature, the associated change in value is presented as a capital item in the Income Statement.

Where options are written for the purpose of generating revenue, applicable premiums are recognised evenly over the life of the option and shown in the revenue return, with the appropriate amount shown as capital return such that the total return reflects the overall change in the fair value of the option. No options were transacted during the year nor held at

30 June 2022 (2021: none).

2 Gains on investments held at fair value through profit or loss


	2022 £’000	2021 £’000
Gains on the sale of investments based on historical cost	37,060	31,859
Revaluation gains recognised in previous years	(25,770)	(23,405)
Gains on investments sold in the year based on carrying value at the previous Statement of Financial Position date	11,290	8,454
Revaluation of investments held at 30 June	1,992	191,870
Exchange gains/(losses)	112	(57)
Total gains on investments held at fair value through profit or loss	13,394	200,267

3 Income from investments held at fair value through profit or loss


	2022 £’000	2021 £’000
UK dividends:
Listed – ordinary dividends	79,682	64,806
Listed – special dividends	5,702	2,413
	85,384	67,219
Other dividends:
Dividend income – overseas investments	10,041	8,856
Dividend income – overseas special dividends	586	–
Dividend income – UK REIT	2,017	1,497
Scrip dividends	–	54
	12,644	10,407
Total	98,028	77,626

4 Other interest receivable and similar income


	2022 £’000	2021 £’000
Stock lending revenue	190	263
	190	263

At 30 June 2022, the total value of securities on loan by the Company for stock lending purposes was £177,048,000 (2021: £211,020,000). The maximum aggregate value of securities on loan at any one time during the year ended 30 June 2022 was £288,549,000 (2021: £285,200,000). The Company’s agent holds collateral at 30 June 2022, with a value of

£192,321,000 (2021: £223,341,000) in respect of securities on loan, the value of which is reviewed on a daily basis and comprises CREST Delivery By Value (“DBVs”) and Government Bonds with a market value of 109% (2021: 106%) of the market value of any securities on loan.

5 Management fee


		2022			2021
Revenue return £’000	Capital return £’000	Total return £’000	Revenue return £’000	Capital return £’000	Total return £’000
Management fee	1,746	4,073	5,819	1,493	3,484	4,977

A summary of the terms of the Management Agreement is given on page 21. Details of apportionment between revenue and capital can be found in note 1 on page 68.

6 Other administrative expenses


	2022 £’000	2021 £’000
Directors' fees and expenses (see Directors' Remuneration Report on page 53)	187	186
Auditors' remuneration – for statutory audit services	46	44
Marketing	88	81
Bank charges (loan facility fees)	11	10
Annual and half-year reports	45	48
Registrar's fees	84	89
AIC	21	21
Listing fees	124	118
Advisory and consultancy fees	45	17
Depositary fees	58	56
Other expenses	65	56
Expenses charged to revenue	774	726
Expenses charged to capital1	–	7
	774	733

1 The capital expenses incurred in 2021 relate to the redemption of the 8.5% debenture stock 2021

All transactions with Directors are disclosed in the Directors’ Remuneration Report and are related party transactions.

7 Finance costs


		2022			2021
Revenue return £’000	Capital return £’000	Total return £’000	Revenue return £’000	Capital return £’000	Total return £’000
Interest on debentures and secured notes repayable wholly or partly:
– within one year	–	–	–	446	1,041	1,487
– after five years (includes amortisation of secured notes issue costs)	1,167	2,724	3,891	996	2,322	3,318
Bank overdraft interest	150	351	501	97	226	323
Dividends per share:
– cumulative first preference stock	18	–	18	18	–	18
– non-cumulative second preference stock	21	–	21	21	–	21
– non-cumulative preferred ordinary stock	118	–	118	118	–	118
	1,474	3,075	4,549	1,696	3,589	5,285

Details of apportionment between revenue and capital can be found in note 1 on page 68.

8 Taxation

Analysis of tax charge for the year


		2022			2021
Revenue return £’000	Capital return £’000	Total return £’000	Revenue return £’000	Capital return £’000	Total return £’000
Overseas withholding tax	1,562	–	1,562	1,575	–	1,575
Less: overseas withholding tax recoverable	(326)	–	(326)	(410)	–	(410)
	1,236	–	1,236	1,165	–	1,165

The Company’s profit for the accounting year is taxed at an effective rate of 19% (2021: 19%). The tax charge for the year is lower than the corporation tax rate. The differences are explained below:

Factors affecting the tax charge for the year


		2022			2021
Revenue return £’000	Capital return £’000	Total return £’000	Revenue return £’000	Capital return £’000	Total return £’000
Return before taxation	94,224	6,246	100,470	73,974	193,187	267,161
Corporation tax at 19% (2021: 19%)	17,902	1,187	19,089	14,055	36,706	50,761
Effects of:
Non-taxable UK dividends	(16,223)	–	(16,223)	(12,772)	–	(12,772)
Non-taxable overseas dividends	(2,019)	–	(2,019)	(1,682)	–	(1,682)
Overseas tax suffered	1,236	–	1,236	1,165	–	1,165
Expenses not deductible for tax purposes	1	–	1	1	1	2
Excess management expenses	309	1,358	1,667	368	1,344	1,712
Preference and preferred ordinary dividends not allowable for tax	30	–	30	30	–	30
Net capital gains not subject to tax	–	(2,545)	(2,545)	–	(38,051)	(38,051)
	1,236	–	1,236	1,165	–	1,165

Investment trusts are exempt from corporation tax on capital gains provided that the Company complies with tests under Section 1158 of the Corporation Tax Act 2010.

Deferred taxation

No provision for deferred taxation has been made in the current or prior accounting year. The Company has not provided for deferred tax on capital gains or losses arising on the revaluation and disposal of investments as it is exempt from tax on these items because of its investment trust status.

Factors that may affect future tax charges

The Company can offset management fees, other administrative expenses and interest costs against taxable income to eliminate any tax charge on such income. The tax legislation refers to these as management expenses (management fees and other administrative expenses) and non-trade loan relationship deficits (interest costs) and these are captured together under the heading “Excess management expenses” in the table above. Where these are not fully utilised, they can be carried forward to future years. As the Company is unlikely to generate future taxable profits to utilise these amounts, the Company cannot recognise an asset to reflect them, but must still disclose the deferred tax amount carried forward arising from any unutilised amounts.

Consequently, the Company has not recognised a deferred tax asset totalling £38,319,000 (2021: £36,763,000) at a prospective tax rate of 25% (2021: 25%) arising as a result of having unutilised management expenses and unutilised

non-trade loan relationship deficits. These expenses will only be utilised, to any material extent, if changes are made either to the tax treatment of the capital gains made by investment trusts or to the Company’s investment profile which require them to be used.

9 Return per ordinary share – basic and diluted

The return per ordinary share is based on the net return attributable to the ordinary shares of £99,234,000 (2021: return of

£265,996,000) and on 448,747,183 ordinary shares (2021: 425,921,991), being the weighted average number of ordinary shares in issue during the year.

The return per ordinary share is analysed between revenue and capital as below.


	2022 £’000	2021 £’000
Net revenue return	92,988	72,809
Net capital return	6,246	193,187
Net total return	99,234	265,996
Weighted average number of ordinary shares in issue during the year	448,747,183	425,921,991


	2022 Pence	2021 Pence
Revenue return per ordinary share	20.72	17.09
Capital return per ordinary share	1.39	45.36
Total return per ordinary share	22.11	62.45

The Company does not have any dilutive securities, therefore the basic and diluted returns per share are the same.

10 Dividends paid on ordinary shares


	Record date	Payment date	2022 £’000	2021 £’000
Fourth interim dividend (4.75p) for the year ended 30 June 2020	31 July 2020	28 August 2020	–	19,779
First interim dividend (4.75p) for the year ended 30 June 2021	30 October 2020	30 November 2020	–	19,723
Second interim dividend (4.75p) for the year ended 30 June 2021	29 January 2021	26 February 2021	–	20,205
Third interim dividend (4.80p) for the year ended 30 June 2021	30 April 2021	28 May 2021	–	21,218
Fourth interim dividend (4.80p) for the year ended 30 June 2021	06 August 2021	31 August 2021	21,434	–
First interim dividend (4.80p) for the year ended 30 June 2022	29 October 2021	30 November 2021	21,434	–
Second interim dividend (4.80p) for the year ended 30 June 2022	28 January 2022	28 February 2022	21,434	–
Third interim dividend (5.00p) for the year ended 30 June 2022	28 April 2022	31 May 2022	22,684	–
Unclaimed dividends over 12 years old			(34)	(60)
			86,952	80,865

In accordance with FRS 102, interim dividends payable to equity shareholders are recognised in the Statement of Changes in Equity when they have been paid to shareholders. All dividends have been paid out of revenue reserves or current year revenue profits and at no point during the year did the revenue reserve move to a negative position.

The total dividends payable in respect of the financial year which form the basis of the test under Section 1158 of the Corporation Tax Act 2010 are set out below.


	2022 £’000	2021 £’000
Revenue available for distribution by way of dividend for the year	92,988	72,809
First interim dividend of 4.80p (2021: 4.75p)	(21,434)	(19,723)
Second interim dividend of 4.80p (2021: 4.75p)	(21,434)	(20,205)
Third interim dividend of 5.00p (2021: 4.80p)	(22,684)	(21,218)
Fourth interim dividend of 5.00p (2021: 4.80p) paid on 31 August 2022¹	(23,139)	(21,434)
Transfer to/(from) revenue reserve²	4,297	(9,771)

1 Based on 462,789,868 ordinary shares in issue at 4 August 2022 (the ex-dividend date) (2021: 446,549,868)

2 The surplus of £4,297,000 (2021: deficit of £9,771,000) has been taken to/(from) the revenue reserve

Since the year end, the Board has announced a first interim dividend of 5.00p per ordinary share, in respect of the year ending 30 June 2023. This will be paid on 30 November 2022 to holders registered at the close of business on 28 October 2022. The Company’s shares will go ex-dividend on 27 October 2022.

11 Investments held at fair value through profit or loss


	Investments in subsidiaries £’000	Other investments £’000	Total £’000
Valuation at 1 July 2021	347	1,846,674	1,847,021
Investment holding gains at 1 July 2021	–	(423,489)	(423,489)
Cost at 1 July 2021	347	1,423,185	1,423,532
Additions at cost	–	195,569	195,569
Disposals at cost	–	(95,194)	(95,194)
Cost at 30 June 2022	347	1,523,560	1,523,907
Investment holding gains at 30 June 2022	–	399,710	399,710
Valuation at 30 June 2022	347	1,923,270	1,923,617


	Investments in subsidiaries £’000	Other investments £’000	Total £’000
Valuation at 1 July 2020	347	1,571,024	1,571,371
Investment holding gains at 1 July 2020	–	(255,024)	(255,024)
Cost at 1 July 2020	347	1,316,000	1,316,347
Additions at cost	–	222,412	222,412
Disposals at cost	–	(115,227)	(115,227)
Cost at 30 June 2021	347	1,423,185	1,423,532
Investment holding gains at 30 June 2021	–	423,489	423,489
Valuation at 30 June 2021	347	1,846,674	1,847,021

The portfolio valuation at 30 June 2022 of £1,923,270,000 (2021: £1,846,674,000) is shown on the Statement of Financial Position as investments held at fair value through profit or loss.

Purchase transaction costs for the year ended 30 June 2022 were £922,000 (2021: £1,046,000). These comprise mainly stamp duty and commission. Sale transaction costs for the year ended 30 June 2022 were £46,000 (2021: £51,000).

The Company received £132,254,000 (2021: £147,086,000) from investments sold in the year. The book cost of these investments when they were purchased was £95,194,000 (2021: £115,227,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.

12 Subsidiaries and related undertakings

The Company’s related undertakings are its three wholly-owned subsidiary undertakings, all of which are registered in England and Wales: The City of London European Trust Limited, City of London Investments Limited and The City of London Finance Company Limited.

The financial statements of the three companies have not been consolidated on the basis of immateriality and dormancy. Consequently the financial statements present information about the Company as an individual entity. The Directors consider that the values of the subsidiary undertakings are not less than the amounts at which they are included in the financial statements. The subsidiaries are maintained in order to protect the company names.

● The City of London European Trust Limited was incorporated in 1899 as Patrick & McGregor Limited and is dormant, not having traded since 1968. Its registered office is 201 Bishopsgate, London, EC2M 3AE. The aggregate amount of the capital and reserves of The City of London European Trust Limited at 30 June 2022 was £347,000 (2021: £347,000). This company has 10,000 issued ordinary shares of £1 each.

● City of London Investments Limited is a dormant company and has not traded since its incorporation in 1982. Its registered office is 201 Bishopsgate, London, EC2M 3AE. The aggregate amount of the capital and reserves of City of London Investments Limited at 30 June 2022 was £2 (2021: £2). This company has two issued ordinary shares of £1 each.

● The City of London Finance Company Limited was incorporated in 1978 as a share dealing company. It is a dormant company, having not traded since 2009. Its registered office is 201 Bishopsgate, London, EC2M 3AE. The aggregate amount of capital and reserves of The City of London Finance Company Limited at 30 June 2022 was £2 (2021: £2). This company has two issued ordinary shares of £1 each.

13 Debtors


	2022 £’000	2021 £’000
Withholding and income tax recoverable	2,278	1,953
Sales for future settlement	–	692
Outstanding share issues	482	–
Prepayments and accrued income	8,691	7,512
	11,451	10,157

14 Creditors: amounts falling due within one year


	2022 £’000	2021 £’000
Bank loans and overdraft	16,270	9,984
Amounts owed to subsidiary undertakings	347	347
Purchases for future settlement	479	–
Dividends payable on preference and preferred ordinary stocks	79	79
Accruals and deferred income	5,660	3,913
	22,835	14,323

The Company has an uncommitted overdraft facility of £120,000,000 at 30 June 2022 (2021: £120,000,000) provided by its Custodian and has provided a floating charge over its assets in return. The overdraft may be withdrawn by the Custodian at any time and is repayable on demand. Interest on the overdraft was payable at a rate of HSBC base rate plus 1.25% at 30 June 2022 (2021: plus 1.25%). Covenants relating inter alia to a maximum level of borrowings apply to the Company’s borrowing facility. A breach of these covenants may result in any overdraft drawn down becoming repayable immediately.

15 Creditors: amounts falling due after more than one year


	2022 £’000	2021 £’000
4.53% secured notes 2029	34,752	34,720
2.67% secured notes 2046	29,752	29,745
2.94% secured notes 2049	49,673	49,666
£301,982 cumulative first preference stock	302	302
£507,202 non-cumulative second preference stock	507	507
£589,672 non-cumulative preferred ordinary stock	590	590
	115,576	115,530

On 22 January 2014 the Company issued £35,000,000 (nominal) 4.53% secured notes due 2029, net of issue costs totalling £476,000. The issue costs will be amortised over the life of the secured notes.

On 17 November 2017 the Company issued £50,000,000 (nominal) 2.94% secured notes due 2049, net of issue costs totalling £360,000. The issue costs will be amortised over the life of the secured notes.

On 19 March 2021 the Company issued £30,000,000 (nominal) 2.67% secured notes due 2046, net of issue costs totalling

£257,000. The issue costs will be amortised over the life of the secured notes.

The repayment terms of the secured notes are as follows:

● £35,000,000 4.53% secured notes 2029 redeemable at par on 22 January 2029.

● £30,000,000 2.67% secured notes 2046 redeemable at par on 19 March 2046.

● £50,000,000 2.94% secured notes 2049 redeemable at par on 17 November 2049.

The notes are secured by a first floating charge over the Company’s assets.

15 Creditors: amounts falling due after more than one year (continued)

A summary of the rights that attach to each of the preference and preferred ordinary stocks, all of which are non- redeemable, is given below.


	First Preference Stock	Second Preference Stock	Preferred Ordinary Stock
a) Rights to dividends	A fixed cumulative dividend of 6% per annum, of which 5.5% is payable in preference to the dividend on the second preference stock and 0.5% is payable after it.	A fixed non-cumulative dividend of 4.2% per annum, which is payable after the first 5.5% per annum entitlement on the first preference stock.	A fixed non-cumulative dividend of 20% per annum, which is payable after the entitlements on the first and second preference stocks.
b) Priority and amounts receivable on a winding-up	Repayment of capital in priority to payment to the other members of the Company. Any arrears of dividend are payable after the repayment of the capital on the second preference stock.	Repayment of capital after the repayment of the capital on the first preference stock.	Payment of £3.50 in respect of each £1 of capital, after the repayment of the entitlements on the first and second preference stocks.
c) Voting rights at general meetings	Right to attend and vote at general meetings. On a poll, voting rights are one vote per £10 of stock held.	No rights to attend or vote at general meetings (except on a winding-up of the Company or if dividends are in arrears).	Right to attend and vote at general meetings. On a poll, voting rights are one vote per £20 of stock held.

Notes:

i) The dividend entitlements of the first preference stock and the preferred ordinary stock reverted on 6 April 1999 to the rates which applied before 6 April 1973

ii) In the event of a winding-up, the preferred ordinary stock would be repaid at £3.50 per £1 of stock. However, its share of equity shareholders’ funds is included in the financial statements at par because no winding-up is envisaged

16 Risk management policies and procedures

The Directors manage investment risk principally through setting an investment policy (that is approved by shareholders) which incorporates risk parameters (see pages 20 and 21), by contracting management of the Company’s investments to an investment manager (Janus Henderson) under a contract which incorporates appropriate duties and restrictions and by monitoring performance in relation to these. Internal control and the Board’s approach to risk is on pages 44 and 45. There have been no material changes to the management or nature of the Company’s investment risks from the prior year.

The main risks arising from the Company’s pursuit of its investment objective are market risk (comprising market price risk, currency risk and interest rate risk), credit risk and liquidity risk. The effects of these can also be increased by gearing.

The Board and Janus Henderson coordinate the Company’s risk management and there are various risk management systems in place as detailed below.

● Straight-through processing via a deal order and management system (“OMS”) is utilised for listed securities.

● Portfolio modelling and investment management functions (including order-raising, dealing and trade execution) are performed using one of, or a combination of, the following third-party software applications: Charles River Development OMS and/or Imagine.

● Fund pricing and accounting services are outsourced to a third-party administrator (currently BNP Paribas Securities Services) which utilises HiPortfolio software.

● The IT tools to which the Janus Henderson risk, compliance and operations teams have access for independent monitoring and risk measurement purposes include:

– Charles River Compliance module for investment restrictions monitoring;

– SAI360 operational risk database;

– RiskMetrics, UBS Delta, Style Research, Cognity and Barra for market risk measurement;

– Bloomberg for market data and price-checking; and

– HiPortfolio for portfolio holdings and valuations.

16 Risk management policies and procedures (continued)

16.1 Market risk

The fair value of a financial instrument held by the Company may fluctuate due to changes in market prices. This market risk comprises market price risk (see note 16.1.1), currency risk (see note 16.1.2) and interest rate risk (see note 16.1.3). The Fund Manager assesses the exposure to market risk when making each investment decision, and monitors the overall level of market risk on the whole of the investment portfolio on an ongoing basis.

16.1.1 Market price risk

Market price risk (changes in market prices other than those arising from interest rate risk or currency risk) may affect the value of investments. The Company’s investments are susceptible to market price risk arising from uncertainties about the future prices of the investments.

Management of the risk

The Board manages the risks inherent in the investment portfolio by ensuring full and timely access to relevant information from Janus Henderson. The Board meets regularly and at each meeting reviews investment performance. The Board monitors Janus Henderson’s compliance with the Company’s objectives, including investment strategy and asset allocation.

When appropriate, the Company may buy/sell put or call options or futures on indices and on equity investments in its portfolio to manage its exposure to price risk or to generate income. At 30 June 2022, the Company had no open positions (2021: nil).

Concentration of exposure to market price risk

An analysis of the Company’s investment portfolio is shown on pages 16 and 17. This shows that the majority of the Company’s investments are in UK-listed companies. Accordingly, there is a concentration of exposure to the UK, though it is recognised that an investment’s country of domicile or of listing does not necessarily equate to its exposure to the economic conditions in that country.

Market price risk sensitivity

The sensitivity of (a) the return after taxation for the year and (b) the Company’s net assets to an increase or decrease of 10% in the fair values of the Company’s investments at each Statement of Financial Position date is shown below. This level of change is considered to be reasonably possible, based on observation of current market conditions.

The impact of a 10% increase in the value of the investments on the revenue return as at 30 June 2022 is a decrease of

£188,000 (2021: £180,000) and on the capital return is an increase of £191,890,000 (2021: £184,247,000). The total impact on equity shareholders’ funds would be an increase of £191,702,000 (2021: £184,067,000).

The impact of a 10% decrease in the value of the investments on the revenue return as at 30 June 2022 is an increase of

£188,000 (2021: £180,000) and on the capital return is a decrease of £191,890,000 (2021: £184,247,000). The total impact on equity shareholders’ funds would be a decrease of £191,702,000 (2021: £184,067,000).

16.1.2 Currency risk

The Company is not itself materially exposed to currency risk, although some of the investments will be in companies that have operations that involve currency risk and pay dividends in foreign currencies.

Management of the risk

Investment income denominated in foreign currencies is converted into sterling on receipt. The Company does not use financial instruments to mitigate the currency exposure in the period between the time that income is included in the financial statements and its receipt. However, the Company does sometimes hedge foreign currency exposure ahead of the declaration of dividends from companies in which it invests.

Foreign currency exposure

The fair values of the Company’s monetary items that have foreign currency exposure at 30 June 2022 are £2,845,000 (2021: £2,892,000).

Foreign currency sensitivity

The Company’s sensitivity to movements in exchange rates affecting its investment income, assuming a 10% movement in the sterling/US dollar rate, will be a loss of £1,230,000 (2021: £816,000) if sterling strengthens and a profit of £1,879,000 (2021: £997,000) if sterling weakens and, assuming a 10% movement in the sterling/euro rate, will be a loss of £333,000 (2021: £570,000) if sterling strengthens and a profit of £782,000 (2021: £422,000) if sterling weakens. The 10% movement has been based on average market volatility in exchange rates in the previous 12 months.

16 Risk management policies and procedures (continued)

16.1.3 Interest rate risk

Interest rate movements may affect:

● the level of income receivable from cash at bank and on deposit; and

● the interest payable on the Company’s variable rate bank borrowings.

Management of the risk

The Company, generally, does not hold significant cash balances. The Company finances part of its activities through borrowings at levels approved and monitored by the Board. Derivative contracts have not been used during the year to hedge against the exposure to interest rate risk. There has been no hedging during the year.

Interest rate exposure

The Company’s exposure at 30 June 2022 of financial assets and financial liabilities to fixed interest rate risk can be found in note 15. The exposure to floating interest rates can be found on the Statement of Financial Position under cash at bank and under bank overdraft in note 14.

Interest receivable and finance costs are at the following rates:

● interest received on cash balances is at a margin over the HSBC base rate; and

● interest paid on borrowings under the overdraft facility provided by the Custodian is at a margin of 1.25% above the HSBC base rate (2021: same).

The table below analyses the Company’s contractual liabilities.


		2022			2021
Within 1 year £’000	Between 1 and 5 years £’000	More than 5 years £’000	Within 1 year £’000	Between 1 and 5 years £’000	More than 5 years £’000
Secured notes1	3,857	15,426	165,377	3,857	15,426	169,234
Preference stock and preferred ordinary stock2	157	628	1,399	157	628	1,399
Bank overdrafts and interest	16,270	–	–	9,984	–	–
Other creditors and accruals	6,565	–	–	4,339	–	–
	26,849	16,054	166,776	18,337	16,054	170,633

1 The above figures show interest payable over the remaining term of the secured notes. The figures in the “more than 5 years” column also include the capital to be repaid. Details of repayment are set out on page 75 and interest payment dates on page 91

2 The figures in the “more than 5 years” columns do not include the ongoing annual finance cost of £157,000

Interest rate risk sensitivity

The Company is not materially exposed to changes in interest rates.

16.2 Liquidity risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

Management of the risk

Liquidity risk is not significant as the majority of the Company’s assets is in investments in quoted equities that are readily realisable. For details of the Company’s bank borrowing facility, see note 14.

The Board gives guidance to Janus Henderson as to the maximum amount of the Company’s resources that should be invested in any one company. The policy is that the Company should remain fully invested in normal market conditions and that short-term borrowings should be used to fund short-term cash requirements.

Liquidity risk exposure

The remaining contractual maturities of the financial liabilities at 30 June 2022, based on the earliest date on which payment can be required, is given on page 75.

16 Risk management policies and procedures (continued)

16.3 Credit and counterparty risk

The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss.

Management of the risk

The risk is not significant and is managed as follows:

● investment transactions are carried out with a large number of brokers, whose credit standard is reviewed periodically by the Fund Manager, and limits are set on the amount that may be due from any one broker; and

● cash at bank and overdrafts is held only with reputable banks with high quality external credit ratings.

Stock lending transactions are carried out with a number of approved counterparties, whose credit rating is reviewed regularly by Janus Henderson and limits are set on the amount that may be lent to any one counterparty. Stock lending is the temporary transfer of securities by a lender to a borrower, with an agreement by the borrower to return equivalent

securities to the lender at an agreed future date. Stock lending revenue is received for making the investments available to the borrower, which increases the returns on the portfolio. In all cases, securities lent continue to be recognised in the Statement of Financial Position. Details of the value of securities on loan at the year end, and the collateral held, can be found in note 4.

In summary, the Company only transacts with counterparties that it considers to be credit worthy. The exposure to credit and counterparty risk at 30 June 2022 was to debtors of £11,451,000 (2021: £10,157,000).

None of the Company’s financial assets are past their due date or impaired.

16.4 Fair values of financial assets and financial liabilities

The financial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value or the Statement of Financial Position amount is a reasonable approximation of fair value (debtors and creditors falling due within one year). The secured notes, preference stocks and preferred ordinary stock are carried in the Statement of Financial Position at par.

At 30 June 2022, the fair value of the secured notes was estimated to be £101,131,000 (2021: £128,494,000). At 30 June 2022, the fair value of the preferred and preference stock was £2,635,000 (2021: £2,635,000). The valuation of the preferred and preference stock is from the Daily Official List quotations.

The fair value of the secured notes is calculated using a discount rate which reflects the yield of a UK Gilt of similar maturity plus a suitable credit spread.

The preference stocks and preferred ordinary stock are categorised as Level 1 in the fair value hierarchy. The secured notes are categorised as Level 3 in the fair value hierarchy.

16.5 Fair value hierarchy disclosures

The table below sets out fair value measurements using FRS 102 fair value hierarchy.


Financial assets at fair value through profit or loss at 30 June 2022	Level 1 £’000	Level 2 £’000	Level 3 £’000	Total £’000
Equity investments	1,923,270	–	347	1,923,617
Total	1,923,270	–	347	1,923,617


Financial assets at fair value through profit or loss at 30 June 2021	Level 1 £’000	Level 2 £’000	Level 3 £’000	Total £’000
Equity investments	1,846,674	–	347	1,847,021
Total	1,846,674	–	347	1,847,021

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows:

Level 1 – the unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date;

Level 2 – inputs other than quoted prices included within Level 1 that are observable (i.e., developed using market data) for the asset or liability, either directly or indirectly; and

Level 3 – inputs are unobservable (i.e., for which market data is unavailable) for the asset or liability.

16 Risk management policies and procedures (continued)

16.5 Fair value hierarchy disclosures (continued)

The valuation techniques used by the Company are explained in the accounting policies note on page 67.

There have not been any transfers during the year between any of the levels. A reconciliation of fair value movements within Level 3 is set out below.


Reconciliation of Level 3 fair value measurement of financial assets	£’000
Opening and closing fair value	347

16.6 Capital management policies and procedures

The Company’s capital management objectives are to ensure that it will be able to continue as a going concern, and to provide long-term growth in income and capital, principally by investment in UK equities.

The Company’s total capital at 30 June 2022 was £1,928,503,000 (2021: £1,852,839,000) comprising £16,270,000

(2021: £9,984,000) of bank overdrafts, £114,177,000 (2021: £114,131,000) of secured notes, £1,399,000 (2021: £1,399,000) of preference and preferred stock and £1,796,657,000 (2021: £1,727,325,000) of equity share capital and reserves.

The Company is subject to several externally imposed capital requirements:

● borrowings under the overdraft facility are not to exceed the lower of £120,000,000 or 15% of the portfolio;

● as a public company, the Company has a minimum share capital of £50,000;

● in order to be able to pay dividends out of profits available for distribution by way of dividends, the Company has to be able to meet one of the two capital restriction tests imposed on investment companies by company law; and

● the terms of the secured notes include financial covenants in relation to the level of borrowings.

The Company has complied with these requirements.

Other than in exceptional market conditions, gearing will not exceed 20% of the net asset value at the time of the draw down of the relevant borrowings.

17 Called up share capital


	Shares in issue	Nominal value of total shares in issue £’000
Allotted and issued ordinary shares of 25p each:
At 1 July 2021	445,624,868	111,406
Issue of new ordinary shares	14,015,000	3,504
At 30 June 2022	459,639,868	114,910
	Shares in issue	Nominal value of total shares in issue £’000
Allotted and issued ordinary shares of 25p each:
At 1 July 2020	416,404,868	104,101
Buyback of ordinary shares for treasury	(1,175,000)	–
Issue of ordinary shares from treasury	1,175,000	–
Issue of new ordinary shares	29,220,000	7,305
At 30 June 2021	445,624,868	111,406

The Company issued 14,015,000 (2021: 29,220,000) ordinary shares with total proceeds of £57,050,000

(2021: £109,811,000) after deduction of issue costs of £291,000 (2021: £170,000). The average price of the ordinary shares that were issued was 408.6p (2021: 375.8p). During the year there were no shares re-purchased by the Company (2021: 1,175,000 shares were bought back at a total cost of £3,736,000 all of which were placed into treasury. These shares were then re-issued for total proceeds of £3,860,000 after deduction of issue costs of £6,000).

18 Share premium account


	2022 £’000	2021 £’000
At beginning of year	855,597	752,967
Issue of ordinary shares from treasury	–	124
Issue of new shares	53,837	102,676
Less: issue costs	(291)	(170)
At end of year	909,143	855,597

19 Other capital reserves


	Capital redemption reserve £’000	Capital reserve arising on revaluation of investments held £’000	Capital reserve arising on investments sold £’000	Other capital reserves £’000
At 1 July 2021	2,707	423,487	296,561	720,048
Transfer on disposal of investments	–	(25,770)	25,770	–
Net gains on investments1	–	1,992	11,290	13,282
Exchange gains	–	–	112	112
Management fees charged to capital	–	–	(4,073)	(4,073)
Finance costs charged to capital	–	–	(3,075)	(3,075)
At 30 June 2022	2,707	399,709	326,585	726,294

1 During the year the Company received special dividends totalling £5,447,000 which were deemed to be capital in nature and were taken to the capital reserve arising on investments sold. These dividends are available to be distributed to shareholders as part of realised capital profits


	Capital redemption reserve £’000	Capital reserve arising on revaluation of investments held £’000	Capital reserve arising on investments sold £’000	Other capital reserves £’000
At 1 July 2020	2,707	255,022	271,839	526,861
Transfer on disposal of investments	–	(23,405)	23,405	–
Net gains on investments1	–	191,870	8,454	200,324
Buyback of 1,175,000 ordinary shares for treasury	–	–	(3,736)	(3,736)
Issue of 1,175,000 ordinary shares from treasury	–	–	3,736	3,736
Exchange losses	–	–	(57)	(57)
Management fees charged to capital	–	–	(3,484)	(3,484)
Finance costs charged to capital	–	–	(3,589)	(3,589)
Other administrative expenses	–	–	(7)	(7)
At 30 June 2021	2,707	423,487	296,561	720,048

1 During the year the Company received special dividends totalling £7,160,000 which were deemed to be capital in nature and were taken to the capital reserve arising on investments sold. These dividends are available to be distributed to shareholders as part of realised capital profits

20 Revenue reserve


	£’000
At 1 July 2021	37,567
Net return for the year	92,988
Dividends paid (note 10)	(86,952)
At 30 June 2022	43,603


	£’000
At 1 July 2020	45,623
Net return for the year	72,809
Dividends paid (note 10)	(80,865)
At 30 June 2021	37,567

21 Net asset value per ordinary share – basic and diluted

The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £1,796,657,000 (2021: £1,727,325,000) and on 459,639,868 (2021: 445,624,868) shares in issue on 30 June 2022.

An alternative net asset value per ordinary share can be calculated by deducting from the total assets less current liabilities of the Company the preference and preferred ordinary stocks and secured notes at their market (or fair) values rather than at their par (or book) values. The net asset value per ordinary share at 30 June 2022 calculated on this basis was 393.45p (2021: 384.12p). See page 86 for further details of the Alternative Performance Measure and how it is calculated.


The movements during the year of the assets attributable to the ordinary shares were as follows:	£’000
Total net assets attributable to the ordinary shares at 1 July 2021	1,727,325
Total net return after taxation	99,234
Dividends paid on ordinary shares in the year	(86,952)
Issue of shares	57,050
Total net assets attributable to the ordinary shares at 30 June 2022	1,796,657

The Company does not have any dilutive securities.

22 Capital commitments and contingent liabilities

Capital commitments

There were no capital commitments as at 30 June 2022 (2021: none).

Contingent liabilities

As at 30 June 2022, there were no contingent liabilities (2021: none).

23 Transactions with the Manager and related parties

Under the terms of an agreement effective from 22 July 2014 the Company has appointed subsidiaries of Janus Henderson Group plc to provide investment management, accounting, secretarial and administrative services. Janus Henderson has contracted BNP Paribas Securities Services to provide accounting and administration services.

Details of the fee arrangements for these services are given on page 21. The total of management fees paid or payable to Janus Henderson under this agreement in respect of the year ended 30 June 2022 was £5,819,000 (2021: £4,977,000). The amount outstanding at 30 June 2022 was £4,357,000 (2021: £2,658,000).

In addition to the above services, Janus Henderson facilitates marketing activities with third parties which are recharged to the Company. The total fees paid or payable for these services for the year ended 30 June 2022 amounted to £79,000 including VAT (2021: £72,000) of which £24,000 was outstanding at 30 June 2022 (2021: £29,000).

Details of fees paid to Directors are included in the Directors’ Remuneration Report on page 53 and in note 6 on page 71.

Additional Information

Securities Financing Transactions

The Company engages in Securities Financing Transactions (as defined in Article 3 of Regulation (EU) 2015-2365, securities financing transactions include repurchase transactions, securities or commodities lending and securities or commodities borrowing, buy-sell back transactions and margin lending transactions). In accordance with Article 13 of the Regulation, the Company’s involvement in and exposures related to securities lending for the year ended 30 June 2022 are detailed below.

Global Data

The amount of securities on loan as a proportion of total lendable assets and the Company’s net assets as at 30 June 2022 are disclosed below:


Stock lending 2022
Market value of securities on loan £’000	% of lendable assets	% of assets under management
177,048	9.21	9.85

Concentration Data

The ten largest collateral issuers across all the securities financing transactions as at 30 June 2022 are disclosed below:


Issuer	Market value of collateral received £’000
UK Treasury	118,793
Government of Japan	35,294
Government of France	24,139
Government of United States	12,806
Aviva	282
BP	100
Unipol	100
Canadian National Railway	100
AstraZeneca	100
Enbridge	100
	191,814

The top ten counterparties of each type of securities financing transactions as at 30 June 2022 are disclosed below:


Counterparty	Market value of securities on loan £’000
Barclays	91,298
HSBC	66,686
Citigroup	11,709
Goldman Sachs	6,098
Bank of Nova Scotia	946
Morgan Stanley	168
Merrill Lynch	140
Société Générale	3
	177,048

All counterparties are shown.

Aggregate Transaction Data

The following table discloses a summary of aggregate transaction data related to the collateral received from securities on loan as at 30 June 2022:


			Stock lending
Counterparty	Counterparty country of origin	Type	Quality	Collateral currency	Settlement basis	Custodian	Market value of collateral received £'000
Barclays	London	Government Debt	Investment Grade	EUR	Tri-party	HSBC	24,139
		UK Gilts	Investment Grade	GBP	Tri-party	HSBC	48,772
		Equity	Main Market Listing	GBP	Tri-party	HSBC	283
		Government Debt	Investment Grade	JPY	Tri-party	HSBC	22,673
HSBC	Hong Kong	UK Gilts	Investment Grade	GBP	Tri-party	HSBC	49,227
		UK Gilts	Investment Grade	GBP	Bilateral	HSBC	20,794
Citigroup	US	Government Debt	Investment Grade	JPY	Tri-party	HSBC	12,295
Morgan Stanley	US	Government Debt	Investment Grade	JPY	Tri-party	HSBC	177
Merrill Lynch	US	Government Debt	Investment Grade	JPY	Tri-party	HSBC	148
Goldman Sachs	US	Government Debt	Investment Grade	USD	Tri-party	HSBC	12,806
Société Générale	France	Equity	Main Market Listing	EUR	Tri-party	HSBC	3
Bank of Nova Scotia	Canada	Equity	Main Market Listing	CAD	Tri-party	HSBC	602
		Equity	Main Market Listing	EUR	Tri-party	HSBC	100
		Equity	Main Market Listing	EUR	Tri-party	HSBC	101
		Equity	Main Market Listing	GBP	Tri-party	HSBC	201
							192,321

The lending and collateral transactions are on an open basis and can be recalled on demand.

Re-use of collateral

The Company does not engage in any re-use of collateral.

Return and cost

The return and cost of engaging in securities lending by the Company and the securities lending agent in absolute terms and as a percentage of overall returns are disclosed below:


Total gross amount of securities lending income	Direct and indirect costs and fees deducted by securities lending agent	% return of the securities lending agent	Net securities lending income retained by the Company	% return of the Company
£238,000	£48,000	20	£190,000	80

Alternative Performance Measures (unaudited)

The Company uses the following Alternative Performance Measures (“APMs”) throughout the annual report, financial statements and notes to the financial statements. The APMs are reconciled to the financial statements through the narrative below. The Board believes that each of the APMs, which are typically used within the investment trust sector, provide additional useful information to shareholders to help assess the Company’s performance against its peer group.

Discount or Premium

The amount by which the market price per share of an investment trust is either higher (premium) or lower (discount) than the NAV per share, expressed as a percentage of the NAV per ordinary share.


	NAV with debt at fair value Pence	NAV with debt at par value Pence	Share price Pence	Premium to fair value NAV %	Premium to par value NAV %
At 30 June 2022	393.45	390.88	400.50	1.8	2.5
At 30 June 2021	384.12	387.62	390.00	1.5	0.6

Gearing/(Net Cash)

Gearing means borrowing money to buy assets with the expectation that the return on investments bought will exceed the interest cost of the borrowings. The gearing percentage reflects the amount of borrowings (e.g. bank loans, overdrafts or secured notes) the Company has used to invest in the market, and is calculated by taking the difference between total investments (see note 11 on page 74) and total shareholders’ funds (see Statement of Financial Position), dividing this by total shareholders’ funds and multiplying by 100 as indicated below:


		2022	2021
Investments held at fair value through profit or loss (page 74) (£’000)	(A)	1,923,270	1,846,674
Net assets (page 66) (£’000)	(B)	1,796,657	1,727,325
Gearing (C = A/B – 1) (%)	(C)	7.1	6.9

The Company can also use synthetic gearing through derivatives and foreign exchange hedging.

NAV with Debt at Par and Fair Value


	2022 £’000	2021 £’000
Investments held at fair value through profit or loss (see note 11)	1,923,270	1,846,674
Investment in subsidiary undertakings (see note 12)	347	347
Current assets (see page 66)	11,451	10,157
Creditors: amounts falling due within one year (see note 14)	(22,835)	(14,323)
Creditors: amounts falling due after one year (see note 15)	(115,576)	(115,530)
NAV with debt at par (A)	1,796,657	1,727,325
Less: fair value of preference and preferred stock and secured notes (see note 16.4)	(103,766)	(131,129)
Add back: par value of preference and preferred stock and amortised cost of secured notes	115,576	115,530
NAV with debt at fair value (B)	1,808,467	1,711,726
Ordinary shares in issue (see note 17) (C) (number)	459,639,868	445,624,868
NAV per ordinary share with debt at par (see page 66) (A/C x 100) (pence)	390.88	387.62
NAV per ordinary share with debt at fair value (B/C x 100) (pence)	393.45	384.12

The aggregate NAV is also referred to as total shareholders’ funds in the Statement of Financial Position. The NAV per ordinary share is published daily and the year end NAV can be found on page 66 and further information is available on page 82 in note 21.

Ongoing Charge

The ongoing charge ratio has been calculated in accordance with guidance issued by the AIC. It represents the total investment management fee and other administrative expenses expressed as a percentage of the average net asset values with debt at fair value throughout the year.


	2022 £’000	2021 £’000
Management fee (see note 5)	5,819	4,977
Other administrative expenses (see note 6)	774	726
Less: non-recurring expenses	(28)	(19)
Ongoing charge	6,565	5,684
Average net assets¹	1,777,338	1,498,874
Ongoing charge ratio	0.37%	0.38%

1 Calculated using the average daily net asset value with debt at fair value

The ongoing charge calculated above is different from ongoing costs provided in the Company’s Key Information Document (“KID”) which are calculated in line with the PRIIPs regulations. The ongoing costs in the KID include finance costs, stock lending fees and costs of holding other investment trusts within the Company’s investment portfolio. The non-recurring expenses include Director recruitment and certain legal fees (2021: same).

Revenue Earnings per Share

The revenue earnings per share is the revenue return for the year (see Income Statement) divided by the weighted average number of ordinary shares in issue during the year (see note 9 on page 73).

Revenue Reserve per Share

The revenue reserve per share is the revenue reserve (see Statement of Financial Position) at the year end divided by the number of shares in issue (see note 17 on page 80) at the year end date.

Total Return

The total return is the return on the share price or NAV with debt at fair value taking into account both the rise and fall of NAVs/share prices and dividends paid to shareholders. Any dividends received by a shareholder are assumed to have been reinvested in either additional shares (for share price total return) or the Company’s assets (for NAV with debt at fair value total return). Dividends paid and payable are set out in note 10 on page 73.


	NAV per share with debt at fair value	Share price
NAV/Share price per share at 30 June 2021 (pence)	384.12	390.0
NAV/Share price per share at 30 June 2022 (pence)	393.45	400.5
Change in the year (%)	2.4	2.7
Impact of dividends reinvested (%)	5.0	4.9
Total return for the year (%)	7.5	7.7

Yield

The yield is the annual dividend expressed as a percentage of the year end share price.


		30 June 2022	30 June 2021
Annual dividend (pence)	(A)	19.6	19.1
Share price (pence)	(B)	400.5	390.0
Yield (C = A/B) (%)	(C)	4.9	4.9

Glossary

Alternative Investment Fund Managers Directive (“AIFMD”)

Agreed by the European Parliament and the Council of the European Union and transposed into UK legislation, the AIFMD classifies certain investment vehicles, including investment companies, as Alternative Investment Funds (“AIFs”) and requires them to appoint an Alternative Investment Fund Manager (“AIFM”) and depositary to manage and oversee the operations of the investment vehicle. The Board of Directors retains responsibility for strategy, operations and compliance and the Directors retain a fiduciary duty to shareholders.

Alternative Performance Measures

Details of alternative performance measures used by the Company can be found on pages 86 and 87.

Association of Investment Companies (“AIC”)

The Company is a member of the AIC which is the trade body for investment companies and represents the industry in relation to various matters which impact the regulation of such entities. The Company is a constituent of the UK Equity Income sector.

Benchmark

A measure against which performance is compared. For the Company this is the FTSE All-Share Index.

Custodian

The custodian is responsible for ensuring the safe custody of the Company’s assets and ensuring that all transactions in the underlying holdings are transacted in an accurate and timely manner.

Depositary

As an AIF, the Company is required to appoint a depositary who has responsibility for overseeing the operations of the Company including safekeeping, cash monitoring and verification of ownership and valuation. The depositary is strictly liable for the loss of any investments or other assets in its custody unless it has notified that it has discharged its liability in certain markets. The Depositary has confirmed that it has not discharged liability in relation to any of the Company’s assets.

The Depositary has further confirmed that, in all material respects, the Company has been managed in accordance with the FCA’s Investment Funds Sourcebook, the Company’s Articles of Association and as required by the AIFMD.

Derivative

A contract between two or more parties in relation to an underlying security. The value of a derivative will fluctuate in accordance with the value of the security and is a form of gearing as the fluctuations in value are usually greater than

the fluctuations in the underlying security’s value. Examples of derivatives are put and call options, swap contracts, futures and contracts for difference. Foreign exchange, interest rates and commodities may also be traded using derivative contracts.

Dividend Dates

When declared or recommended, each dividend will have three key dates applied to it. The payment date is the date on which shareholders will receive their dividend, either by BACS transfer or by receipt of a dividend cheque. The record date applied to the dividend is used as a cut-off for the Company’s Registrar to know which shareholders should be paid a dividend. Only shareholders on the Register of Members at the close of business on the record date will receive the dividend. The ex-dividend date is the business day before the record date and is the date upon which the Company’s net asset value will be disclosed ex-dividend.

Investment Trusts

Investment trusts are public limited companies, listed on the London Stock Exchange, which provide shareholders with a professionally managed portfolio of investments. Investment trusts are exempt from tax on the capital gains arising on their investments subject to meeting certain criteria. Income, net of expenses and tax, is substantially distributed to shareholders. Investment trusts are also known as investment companies, although the tax legislation retains the reference to investment trusts.

Liquidity

In the context of the liquidity of shares in the stock market, this refers to the availability of buyers in the market for the share in question. Where the market in a particular share is described as liquid, that share will be in demand and holders wishing to sell their shares should find ready buyers. Conversely, where the market in a share is illiquid the difficulty of finding a buyer will tend to depress the price that might be negotiated for a sale.

Market Capitalisation

The market value of a company, calculated by multiplying the mid-market price per share by the number of shares in issue.

Ongoing Charge

The ongoing charge reflects those expenses of a type which are likely to recur in the foreseeable future, whether charged to revenue or capital, and which relate to the operation of the Company as a collective fund, excluding the costs of acquisition or disposal of investments, finance costs and gains or losses arising on investments. Details of the calculation of the ongoing charge can be found on page 87.

Simple versus weighted average

The simple average ignores the fund size and assigns an equal weight to all data points. Under the weighted average greater importance (weight) is assigned to funds of a larger size.

General Shareholder Information

AIFMD Disclosures

In accordance with the AIFMD, information in relation to the Company’s leverage and remuneration of Janus Henderson Fund Management UK Limited, as the Company’s AIFM are required to be made available to investors. These disclosures, including those on the AIFM’s remuneration policy, are contained in an AIFMD Disclosure document which can be found on the Company’s website.

BACS

Dividends and interest can be paid to shareholders and stockholders by means of BACS (“Bankers’ Automated Clearing Services”); mandate forms for this purpose are available from the Registrar. Alternatively, shareholders can write to the Registrar to give their instructions; these must include the bank account number, the bank account title and the sort code of the bank to which payments are to be made.

Common Reporting Standard (“CRS”)

Tax legislation under The Organisation for Economic

Co-operation and Development Common Reporting Standard for Automatic Exchange of Financial Account Information requires the Company to provide personal information to HMRC on certain investors who purchase shares in investment trusts. This information is provided annually to the local tax authority of the tax residencies of a number of non-UK based certificated shareholders and corporate entities.

Equality Act 2010

This report and other documents issued by the Company are available from the Corporate Secretary. If needed, copies can be made available in a variety of formats, including Braille, audio tape or larger type as appropriate.

You can contact the Registrar, Computershare Investor Services PLC, which has installed textphones to allow speech and hearing impaired people who have their own textphone to contact them directly, without the need for an intermediate operator by dialling 0370 702 0005. Specially trained operators are available during normal business hours to answer queries via this service.

Alternatively, if you prefer to go through a ‘typetalk’ operator (provided by the Royal National Institute for Deaf People) dial 18001 followed by the number you wish to dial.

Foreign Account Tax Compliance (“FATCA”)

FATCA is a United States federal law whose intent is to enforce the requirement for United States persons (including those living outside the US) to file yearly reports on their non-US financial accounts. Each year, investment trusts need to monitor the trading volume and frequency of their shares and securities to assess whether they have financial accounts. The Company therefore needs to make an annual assessment, before the FATCA return is due, to determine if the shares represent financial accounts and, where they do, will need to identify and report US reportable accounts to HMRC, as required.

General Data Protection Regulation (“GDPR”)

A privacy statement can be found on the website

www.janushenderson.com.

ISA

The Company intends to continue to manage its affairs in order to qualify as an eligible investment for a stocks and shares ISA.

Non-Mainstream Pooled Investments Status

The Company currently conducts its affairs so that its ordinary shares of 25p each can be recommended by IFAs to ordinary retail investors in accordance with the FCA’s rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The shares are excluded from the FCA’s restrictions which apply to non-mainstream investment products because they are shares in an investment trust.

Packaged Retail and Insurance-based Investment Products Regulation (“PRIIPs”)/Key Information Document (“KID”)

Investors should be aware that PRIIPs requires the Manager, as the PRIIP manufacturer, to prepare a KID in respect of the Company. This KID must be made available by the Manager to retail investors prior to them making any investment decision and is available on the Company’s website. The Company is not responsible for the information contained in the KID and investors should note that the procedures for calculating the risks, costs and potential returns are prescribed by the law. The figures in the KID may not reflect the expected returns for the Company and anticipated performance returns cannot be guaranteed.

Performance Details/Share Price Information

Details of the Company’s share price and NAV can be found on the website. The address is www.cityinvestmenttrust.com. The Company’s NAV is published daily.

The market price of the Company’s ordinary shares is published daily in The Financial Times and other leading newspapers. The Financial Times also shows figures for the estimated NAV and the premium/discount.

The market prices of the Company’s ordinary shares, preference and preferred ordinary stocks can be found in the London Stock Exchange Daily Official List.

Shareholder Details

Shareholders who hold their shares in certificated form can check their shareholding with the Registrar, Computershare Investor Services PLC, via www.investorcentre.co.uk.

To gain access to your details on the Computershare site you will need the holder reference number shown on your share certificate.

Taxonomy Regulation

Regulation (EU) 2020/852 establishes the basis for the EU taxonomy. The EU taxonomy is a classification system, establishing a list of environmentally sustainable economic activities to provide companies, investors and policymakers with appropriate definitions for which economic activities can be considered environmentally sustainable. In accordance with the Taxonomy Regulation, the Company confirms that the investments underlying this financial product do not take into account the EU criteria for environmentally sustainable economic activities.

Dates of Dividend and Interest Payments


Dividends1 Ordinary shares: • first interim payable on 30 November • second interim payable on 28 February • third interim payable on 31 May • fourth interim payable on 31 August Preference and preferred ordinary stocks: • payable on 28 February and 31 August 1 Payments are made on the nearest working day prior to the dates indicated above		Secured Notes Interest 4.53% secured notes 2029: • payable on 22 January and 22 July Redeemable at par on 22 January 2029 2.94% secured notes 2049: • payable on 17 May and 17 November Redeemable at par on 17 November 2049 2.67% secured notes 2046: • payable on 19 March and 19 September Redeemable at par on 19 March 2046

Financial Calendar

Annual results: September

Annual General Meeting: October

Half-year results: February

Warning to Shareholders

Many companies are aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas-based ‘brokers’ who target UK shareholders offering to sell them what often turn out to be worthless or high-risk shares in US or UK investments. They can be very persistent and extremely persuasive. Shareholders are therefore advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports.

Please note that it is very unlikely that either the Company or the Company’s Registrar, Computershare Investor Services PLC, would make unsolicited telephone calls to shareholders and that any such calls would relate only to official documentation already circulated to shareholders and never in respect of investment ‘advice’.

If you are in any doubt about the veracity of an unsolicited phone call, please contact the Corporate Secretary on the telephone number detailed on page 92.

You can also check the FCA Warning List at #BeScamSmart https://www.fca.org.uk/scamsmart

Corporate Information

Registered Office

201 Bishopsgate

London EC2M 3AE

Service Providers

Alternative Investment Fund Manager

Janus Henderson Fund Management UK Limited*

201 Bishopsgate

London EC2M 3AE

Corporate Secretary

Janus Henderson Secretarial Services UK Limited*

201 Bishopsgate

London EC2M 3AE

Telephone: 020 7818 1818

Email: [email protected]

Depositary and Custodian

HSBC Bank plc

8 Canada Square

London E14 5HQ

Stockbrokers

Cenkos Securities plc

6-8 Tokenhouse Yard

London EC2R 7AS

Registrar

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol BS99 6ZZ

Telephone: 0370 889 3296

Email: [email protected]

Investors with share certificates (ie not those with a share plan or ISA) can check their holding at www.investorcentre.co.uk

New Zealand

Stockbrokers

Jarden Securities Limited

Level 20, ANZ Centre

23-29 Albert Street

PO Box 5333

Auckland

New Zealand

Registrar

Computershare Investor Services Limited PO Box 92119

Auckland 1142

New Zealand

Telephone (New Zealand): (64) 09 488 8777

Independent Auditors

PricewaterhouseCoopers LLP

Atria One

144 Morrison Street

Edinburgh EH3 8EX

Information Sources

For more information about The City of London Investment Trust plc, visit the website at www.cityinvestmenttrust.com.

To sign up for expert insights about investment trusts, updates from our fund managers as well as AGMs and Trust TV episodes, please visit this page:

www.janushenderson.com/en-gb/investor/subscriptions

Follow the Janus Henderson Investment Trusts on LinkedIn – Janus Henderson Investment Trusts, UK

Investing

Shares can be purchased in the market via a stockbroker or through share dealing platforms. They can also be held through share plans, ISAs or pensions and links to various providers are included on the website.

Potential investors are reminded that the value of investments and the income from them may go down as well as up and investors may not receive back the full amount invested. Tax benefits may vary as a result of statutory changes and their value will depend on individual circumstances.

Nominee Share Code

Where notification has been provided in advance, the Company will arrange for copies of shareholder communications to be provided to the operators of nominee accounts. Nominee investors may attend general meetings and speak at them when invited to do so by the Chairman.

*Janus Henderson Fund Management UK Limited and Janus Henderson Secretarial Services UK Limited changed their names in March 2022 from Henderson Investment Funds Limited and Henderson Secretarial Services Limited respectively

The City of London Investment Trust plc

Registered as an investment company in England and Wales

Registration Number: 34871

Registered Office: 201 Bishopsgate, London EC2M 3AE

ISIN number/SEDOL: Ordinary Shares: GB0001990497/0199049

London Stock Exchange (TIDM) Code: CTY

New Zealand Stock Exchange Code: TCL

Global Intermediary Identification Number (GIIN): S55HF7.99999.SL.826

Legal Entity Identifier (LEI): 213800F3NOTF47H6AO55

Telephone: 0800 832 832

Email: [email protected]

www.cityinvestmenttrust.com

This report is printed on Revive silk 100% recycled, contains 100% recycled waste and is manufactured at a mill certified with ISO 14001 environmental management standard.

The pulp used in this product is bleached using an Elemental Chlorine Free process (ECF).

Designed and typeset by 2112 Communications, London. Printed by DG3 Leycol, London JHI9224/2022

AI Terminal

City of London Investment Trust PLC

4624_10-k_2022-10-26_c093e49f-f097-4341-b685-b57c400f0ebb.html

Total Return Performance for year to 30 June 2022

Dividend Yields

A Brief History

History of income growth

Source: Janus Henderson and Refinitiv Datastream

Compounding income and total return

Reserves

The Markets

Performance

Share Issues

Environmental, Social and Governance

Annual General Meeting

Communication with Shareholders

Outlook

Forty Largest Investments as at 30 June 2022

Classification of Investments and Portfolio Weighting as at 30 June 2022

Fund Manager’s Report

Investment Background

Performance Review

Portfolio Changes

Portfolio Outlook

Sector Breakdown of Investments as at 30 June 2022

Total Return Performance to 30 June 2022

Share Price Performance Total Return to 30 June 2022

Ten Year Net Asset Value and Dividend Record

Our Purpose, Values and Culture

Structure

The Company’s Status

Investment Objective

Investment Policy

Benefits

Arrangements with the Manager

Investment Approach

Liquidity and Discount Management

Borrowings

Diversity

Promoting the Company’s Success

Engagement with Key Stakeholders

Managing our Risks

The Company’s Viability

Measuring our Performance

Environmental, Social and Governance Matters (“ESG”)

Approval

Directors

Fund Manager

Deputy Fund Manager

Results and Dividends

Directors

Share Capital

Holdings in the Company’s Shares

Fund Manager’s Interests

Related Party Transactions

Financial Risk Management

Greenhouse Gas Emissions

Annual General Meeting

Directors’ Statement as to Disclosure of Information to Auditors

Reappointment of Auditors

Listing Rule 9.8.4

Securities Financing Transactions

Approval

Corporate Governance

Applicable Corporate Governance Codes

Statement of Compliance

Board Leadership and Purpose

Operation of the Board

Governance Structure

Division of Responsibilities

The Board

Director Appointment, Tenure and Training

Directors’ Independence

Directors’ Conflicts of Interest

Directors’ Insurance and Indemnification

Board Attendance

Committees of the Board

Continued Appointment of the Manager

Internal Control and Risk Management

Internal Audit Function